Gold Holds Firm as Fed Rate Hike Bets Ease

Gold held above $4,400 an ounce on Tuesday after advancing for two straight sessions, supported by fading expectations for a Federal Reserve rate hike following a string of weak US economic data. Markets now expect the Fed to keep policy unchanged in September and are no longer fully pricing in a rate increase by year-end, unlike just a week ago. Investors are now awaiting the minutes of the Fed’s July meeting and comments from Chairman Kevin Warsh at the annual Jackson Hole symposium for further clues on the policy outlook. Meanwhile, traders remained wary of inflation risks as prospects for a new agreement between the US and Iran dimmed after President Donald Trump said he was not interested in extending the interim peace deal. Elsewhere, gold continued to benefit from stronger investment demand and ongoing central bank purchases, particularly from China.

Gold rose toward $4,400 an ounce on Monday, extending gains from the previous session as subdued US economic data reduced expectations for an imminent Federal Reserve interest rate hike. Data released last week pointed to tame US inflation, while consumer sentiment and retail sales weakened. Markets now see roughly a one-in-three chance of a Fed rate hike in September, down from nearly 50% before the data. Investors are now awaiting the FOMC’s latest meeting minutes and Fed Chair Kevin Warsh’s speech at the Jackson Hole symposium for further guidance. Meanwhile, tensions in the Middle East remain elevated after Israel launched fresh strikes on Lebanon over the weekend, while President Donald Trump is preparing new economic sanctions aimed at forcing Iran to surrender. Still, Middle Eastern producers are covertly moving millions of barrels of crude through the Strait of Hormuz, keeping oil prices in check and easing concerns about inflationary risks.

Gold rose above $4,380 an ounce on Friday, recovering from earlier losses and securing a second consecutive weekly gain as investors assessed the outlook for US monetary policy. Recent US CPI and PPI data showed inflation pressures remaining contained, suggesting that the impact of higher energy prices linked to the Iran conflict eased in July and reducing expectations of an aggressive Federal Reserve stance. Markets now see roughly a one-in-three chance of a rate hike in September, although upcoming employment data and comments from Fed Chair Kevin Warsh at the Jackson Hole symposium could influence expectations. Geopolitical risks remain another key factor, as renewed tensions could push energy prices higher and revive inflation concerns. Meanwhile, strong central-bank demand continues to support gold, with China adding around 20 tonnes to its reserves in July, marking its 21st consecutive month of purchases.