Gold Remains Under Pressure on Fed Hike Bets

Gold climbed toward $4,200 an ounce on Friday, extending gains from the previous session as the recent selloff in equities drove safe-haven demand for government bonds and precious metals. The shift toward safer investments pushed bond yields sharply lower, easing pressure on non-yielding assets such as gold. Investors also weighed heightened geopolitical risks in the Middle East amid escalating hostilities between Saudi Arabia and Iran-backed Houthis in Yemen, while a Singapore-flagged container ship was sunk in the Strait of Hormuz this week by an Iranian projectile. Meanwhile, market participants continued to evaluate the Federal Reserve’s monetary policy outlook, with stronger-than-expected US economic data reinforcing expectations of further interest rate increases. Markets are currently pricing in approximately a 72% probability that the Fed will leave rates unchanged this month, while the likelihood of a rate hike in December has climbed to 92%.

Gold prices rose to around $4,150 an ounce on Thursday, supported by a broader flight to safety amid a global equity sell-off and rising inflation expectations. The tech rout, driven by concerns over the sustainability of AI spending in a high-interest-rate environment, added to market uncertainty. Meanwhile, US producer price data reinforced signs of mounting inflationary pressures, echoing Wednesday’s CPI report and strengthening expectations that the Fed will keep interest rates elevated for longer, putting further strain on heavily indebted borrowers. A weaker US dollar and ongoing geopolitical tensions in the Middle East and Ukraine provided additional support for the precious metal.

Gold climbed toward $4,150 per ounce on Thursday, recovering from the previous session’s losses as crude oil ended its five-day rally, easing pressure across other markets. A softer dollar and retreating bond yields also provided support to metals. However, expectations of more aggressive Federal Reserve rate hikes continued to weigh on sentiment following hotter-than-expected US inflation data. The US Consumer Price Index rose to 3.7% in September, its highest level in four months and above market forecasts of 3.6%, largely driven by rising energy costs. Federal Reserve Bank of Chicago President Austan Goolsbee described the figures as “discouraging” and cautioned that the rapid expansion of artificial intelligence infrastructure could also be overheating the economy. Meanwhile, San Francisco Fed President Mary Daly indicated that the central bank may need to raise short-term interest rates further, although she saw no immediate need for a rate hike at this month’s meeting.