Gold Extend Losses on Rate Hike Bets

Gold fell toward $4,300 an ounce on Wednesday, extending its decline as investors assessed the prospects of Federal Reserve interest rate hikes following a sharp rise in global bond yields and oil prices. Global bond yields climbed amid mounting inflationary pressures and growing expectations of imminent rate hikes, with US Treasury yields reversing the decline triggered by Secretary Scott Bessent’s announcement of an expanded buyback program. Fed Chair Kevin Warsh’s pledge to combat inflation further reinforced the hawkish outlook, with markets now pricing in around a 70% chance of a Fed rate hike this month. Attention now turns to the ADP employment report due Wednesday and Friday’s nonfarm payrolls for further clues on the Fed’s policy path. Meanwhile, oil prices extended gains amid escalating hostilities between the US and Iran, further heightening inflation risks.

Gold prices fell more than 1.5% to around $4,365 an ounce on Tuesday, their lowest level since August 19, as elevated US Treasury yields weighed on the non-yielding asset. Investors are also awaiting key US labour-market data for fresh clues on the Federal Reserve’s monetary policy outlook. US Treasury yields climbed to their highest level since January 2025 as rising Middle East tensions stoked inflation concerns, strengthening expectations for a near-term Fed rate hike. Last week, Fed Chair Kevin Warsh said at the Jackson Hole symposium that the central bank would “have work to do” if policymakers were not confident inflation was returning to its 2% target. Markets are currently pricing a 66% probability of a rate hike later this month, according to the CME FedWatch Tool. Attention now turns to the ADP employment report due on Wednesday and nonfarm payrolls on Friday for further clues on the Fed’s policy path.

Gold traded below $4,450 an ounce on Tuesday, hovering near two-week lows as rising oil prices and hawkish remarks from Federal Reserve Chair Kevin Warsh strengthened expectations for a US rate hike this month. Oil prices advanced for a second straight session after US forces struck an island in the Strait of Hormuz, while Iran responded with attacks on the UAE and Jordan. Higher energy costs stoked inflation concerns, strengthening the case for a near-term Fed rate increase, which is typically negative for bullion. Meanwhile, Chair Warsh said the Fed would “have work to do” without clearer evidence that inflation is moving back toward its 2% target. Markets are now pricing in a more than 65% chance of a September hike, up from around 36% before his remarks. Despite the recent decline, gold still gained about 10% in August after the US Treasury announced plans to double liquidity-support buybacks of longer-dated bonds, reviving the so-called debasement trade.