Gold Bounces on Dovish Fed Rhetoric as Crude Oil Prices Surge
The gold price rebounded nearly 5 per cent from its low of $4,282 on September 2 after two key Fed officials indicated that inflation continues to moderate and rates may remain unchanged. New York Fed President John Williams said there's evidence inflation is trending down as the impact of tariffs fades, while Fed Governor Waller stated his decision on rates will be heavily influenced by upcoming CPI inflation data on September 9.
The dovish Fed rhetoric eased downside risks for gold, and the yellow metal was trading 2.2 per cent higher on the day at around $4,490 at the time of writing. The probability of the Fed hiking rates at its September 16 meeting has declined to a coin toss (50 per cent) from 65 per cent seen a couple of days ago.
Crude oil prices rallied for the fourth straight day on Thursday as Iran targeted US bases in Kuwait and the UAE, escalating tensions between Iran and the US. The main threat to gold remains a sharp rise in crude oil prices, which could strengthen inflation expectations and temper expectations of policy easing.