Gold recovers from two-month low as dollar declines

Gold rose on Thursday as the dollar retreated from an 18-month high.

While the weakening of the dollar supports the recovery of the precious metal from the bottom of two months, investors are evaluating whether the US Federal Reserve (Fed) will raise interest rates again this year.

Spot gold rose 0.5 percent to $4,132.66 per ounce. Gold prices had hit their lowest level since August 5 on Wednesday, under the pressure of the strong dollar and rising US Treasury bond yields.

US gold contracts for December delivery rose 0.4 percent to $4,157.60.

The decline of the dollar supported the demand for gold priced in dollars. Thus, gold became cheaper for investors using other currencies.

Pepperstone Research President Chris Weston said, "Gold's short-term investment story is still challenging. For now, the market is under sellers' control and we think $4,275 needs to be exceeded to be more positive about the short-term rise."

Weston stated that if the rise in long-term bond yields begins to be seen as a reflection of credit and fiscal policy risks of states rather than strong economic fundamentals, gold may diverge positively from bond yields and the "protection against currency depreciation" theme may gain strength again.

Fed officials were divided on the rationale for raising rates last month. According to the meeting minutes, some officials thought that an interest rate increase was necessary to limit the impact of energy and other price shocks, while a more hawkish group argued that the interest rate increase was necessary to counter the emerging demand-driven inflation.

According to CME FedWatch data, investors price the possibility of an interest rate increase this month as 18 percent, while they see the probability of an interest rate increase in December as 80 percent.

High interest rates reduce the appeal of gold, which does not generate interest.

International Monetary Fund (IMF) President Kristalina Georgieva stated that the global economy is under threat due to high energy prices, record public debt and risks arising from the boom in artificial intelligence investments. Georgieva called on governments to take protective measures in fiscal and monetary policies.

In other precious metals, spot silver increased by 0.4 percent to $60.36, platinum increased by 1.8 percent to $1,660.05, and palladium increased by 1.6 percent to $1,142.