Fed Rate Hike Bets Fade, Gold Prices Soar to Highest Level Since June

Gold prices have risen to their highest level since early June due to reduced expectations for further Federal Reserve rate hikes. According to Commerzbank's Carsten Fritsch, markets have scaled back expectations for more Fed rate hikes, with implied tightening in Fed Funds futures decreasing and the probability of a September hike lower.

The gold price has risen by up to 10% since the start of the month, driven by this reversal of excessive expectations. The Commerzbank analyst highlights that the year-end Fed rate is now priced at 3.86%, down from 4% in late July, indicating a decrease of 14 basis points in expected rate hikes.

Fritsch believes that gold retains upside potential even after a brief pullback, citing renewed buying interest from ETF investors. In fact, these investors have been purchasing gold over the past six trading days, with inflows totaling almost 21 tons, the longest period of uninterrupted buying since April.