Gold prices fell on Wednesday, October 7, as rising long-term bond yields to their highest levels in decades in the world's largest credit markets increased the opportunity cost of holding non-yielding assets, putting pressure on precious metals.
The price of gold in spot trading fell by about 1.27% to $4,110.64 an ounce, after hitting its lowest level since August 3rd below $4,100.
US gold futures for December delivery also fell 1.1% to $4,140.70 at settlement.
US Treasury yields jumped even further following strong growth and price data from the US Institute for Supply Management's (ISM) Purchasing Managers' Index.
The minutes of the Federal Reserve’s last meeting reinforced these pressures, showing that members of the Federal Open Market Committee reached a degree of consensus that further interest rate hikes were needed to control inflation.
Frank Walbaum, a market analyst at Naga.com, said: "The yellow metal is likely to remain relatively stable with a slight downward bias."
Recent statements by officials at the US Federal Reserve have confirmed the central bank's commitment to controlling inflation.
Mary Daly, president of the Federal Reserve Bank of San Francisco, said on Tuesday that she believes the need for further rate hikes depends largely on whether the shocks driving inflation up will fade or continue to worsen.
Recent weak economic data has dampened expectations of an October interest rate hike; however, traders still see an 85% probability of an increase in December.