Gold Under Pressure from Rate Hike Bets

Gold traded near $4,400 an ounce on Tuesday after falling in the previous session, pressured by expectations that major central banks will raise interest rates this month as elevated oil prices heighten inflation concerns. Markets are currently pricing in around a 60% probability that the US Federal Reserve will deliver a 25-basis-point rate hike next week following strong jobs data, with upcoming inflation figures expected to offer further clues. The European Central Bank and Bank of Japan are also widely expected to raise rates this month. Meanwhile, investors continued to monitor developments in the Middle East as renewed US-Iran fighting pushed oil prices higher. At the same time, gold could receive support from investment and hedging demand, with central bank purchases and the so-called debasement trade remaining key drivers for the precious metal.

Gold fell to around $4,400 an ounce on Monday, with trading volumes subdued due to a US holiday, after a stronger-than-expected US jobs report pushed bond yields higher and boosted expectations for a Federal Reserve rate hike this month. US nonfarm payrolls increased by 162,000 in August, well above market expectations for a 56,000 gain, while the unemployment rate held at 4.1%. Traders now see nearly a 60% chance of a rate hike at the Fed’s policy meeting next week, up from about 50% before Friday’s jobs data, according to the CME FedWatch Tool. Investors are now awaiting PPI and CPI data later this week for further clues on the Fed’s policy path. Inflation concerns remain elevated, with crude oil prices touching a near three-month high after the US and Iran exchanged strikes on shipping over the weekend. Meanwhile, China extended its gold-buying streak to a 22nd consecutive month in August, lifting its holdings to 76.73 million fine troy ounces.

Gold fell toward $4,400 an ounce on Monday, extending losses from the previous session, pressured by growing expectations of an imminent Federal Reserve interest rate hike following stronger-than-expected US jobs data last week. Data released Friday showed US nonfarm payrolls rose by 162,000 in August, following an upwardly revised increase of 23,000 in July and well above market expectations for a gain of 56,000. Meanwhile, the unemployment rate remained unchanged at 4.1%, while annual wage growth slowed to 3.1%, although the decline was smaller than economists had expected. Markets increased bets on a September Fed rate hike to roughly 60%, up from around 50% before the data release. Gold also remained under pressure from higher oil prices as the US and Iran exchanged strikes on ships over the weekend, stoking concerns about renewed inflationary pressures.