Spot gold climbed to a one-week high on Friday after gaining more than 2% in the previous session. The rebound followed Wednesday's initial selloff, when bullion dropped more than 1% after the Fed raised its benchmark rate by 25 basis points to 3.75%-4.00% and signaled that additional tightening remained possible.
Higher rates are normally bad news for gold because bullion pays no interest. But this time, another macro force quickly became more important: oil started falling.
Falling Oil Changed the Gold Trade
Crude prices declined for a third consecutive session on Friday as concerns over Saudi supply disruptions eased. That helped reduce fears that expensive energy would keep inflation elevated and force the Fed into a longer tightening cycle.
The dollar also weakened during Thursday's rebound, while Treasury yields retreated from their immediate post-Fed spike. Together, those moves removed two of gold's biggest short-term headwinds.
That's particularly important after gold recently struggled with elevated yields. Gold price forecast highlighted how higher Treasury yields were limiting bullion's upside even as institutional positioning remained constructive.
Gold Still Has a Yield Problem
The rebound doesn't mean the Fed suddenly stopped mattering.
The 10-year Treasury yield remains close to the psychologically important 5% area. Persistently high or rising real yields could again pressure gold because investors can earn attractive returns from government bonds without taking bullion price risk.
That relationship has repeatedly driven gold this year. Coinpaper previously examined how falling Treasury yields helped gold break above $4,500.
