Hotter-than-expected consumer prices have revived speculation of an October rate hike by the Federal Reserve, pushing real bond yields higher and dragging gold prices below a critical near-term support level. Commodity analysts, however, believe gold will find support at $4,000 an ounce, as the Fed is unlikely to raise rates just before the 2026 midterm elections.
Ryan McKay, Director of Commodity Strategy at TD Securities, noted that gold’s failure to break through resistance at $4,200 has led to liquidation of long positions by speculative fund managers. He highlighted that this systematic selling is a significant drag on gold prices. However, he emphasized that other pillars of the gold market, such as elevated macro discretionary positions, ETF inflows, and strong central bank demand, should provide critical support at $4,000.
Markets are now pricing in a nearly 44% chance of a rate hike this month, up from 21% before the latest CPI report. While TD Securities does not expect an October hike, they warn that persistent inflationary pressures could lead to more hikes in the coming months, maintaining upward pressure on interest rates. Jeffrey Roach, Chief Economist at LPL Financial, noted that inflation pressures are broadening beyond energy, complicating the Fed’s decision-making process.
Alex Kuptsikevich, Chief Market Analyst at FxPro, expects gold prices to remain stuck between support at $4,050 and resistance at $4,200. He warned that hawkish rhetoric from Federal Reserve Chair Kevin Warsh during an upcoming fireside chat could push prices below $4,000. Ole Hansen, Head of Commodity Strategy at Saxo Bank, also does not expect a rate hike in October but cautioned that the Fed faces a narrow path to balance inflation-fighting credibility with avoiding political interference.