Gold Defies Hike Expectations With Unlikely Rally

The gold price rebounded on Wednesday after hitting a six-week low on Tuesday. Spot gold rose 1.16% to $4,342.50 in early U.S. hours, while December gold futures reached as high as $4,388.80.

The rally is unusual because it occurred ahead of the Federal Reserve's interest rate hike decision. The market had expected a decline due to rising policy rates and long-term yields, which typically increase the opportunity cost of holding gold.

However, this time the yield surge is not driven by a strong, disinflating economy but rather by an oil supply shock and growing concerns about U.S. fiscal sustainability. This strengthens the stagflation and debasement case that underpins gold's long-term bid.