Investors are using gold’s recent sell-off to build positions in the precious metal, after a rise in US Treasury yields drove the commodity to its lowest level in more than a year on Thursday. Markets are increasingly convinced that December will bring a monetary policy tightening by the US Federal Reserve, with the debate now centred on whether the increase will be 25 basis points or a more aggressive 50.

Gold was trading up 0.56% at $3,897.31 per ounce on Friday morning, having gained more than 1% at one point overnight. The move represents a modest recovery from the 2% decline recorded the previous session, when a 12-basis-point rise in yields across several US Treasury maturities put heavy pressure on precious metals markets.

“The drop recorded yesterday at the close in New York is concerning, but it is correlated with a rise in bond yields,” said Rajeev De Mello, portfolio manager at GAMA Asset Management, as quoted by Bloomberg. In his view, Friday’s recovery “can only be explained by reserve managers entering the market” after gold fell below $4,000 per ounce earlier in the week.

Gold has lost more than 6% of its value in just the past three sessions. The swaps market is pricing in a 25-basis-point rate increase by the Federal Reserve as early as next month, though some market participants are anticipating a 50-basis-point tightening.

Those expectations have been reinforced by both economic data and public statements from Fed officials. The presidents of the Federal Reserve Banks of New York and Chicago both stated that inflation remains too elevated in the United States. The president of the San Francisco Fed, meanwhile, said further rate increases will be necessary to bring inflation under control, adding that price pressures are “not simply affecting the sectors most impacted by tariffs and oil”.