Gold Gains as October Fed Hike Bets Fade

Gold prices ticked higher as traders scaled back their expectations for a Federal Reserve rate hike in October. The shift came amid a broader market reassessment of interest rate expectations, with the implied probability of an October hike dropping to 22%, down from around 70% earlier. This reduction in near-term rate hike bets typically benefits gold, as the precious metal does not pay interest, making it more attractive when yields on cash and bonds decline.

However, gold's upside was constrained by persistently high long-term Treasury yields and a stronger U.S. dollar. The 10-year Treasury yield remains near two-decade highs, offering investors attractive returns in government bonds. Meanwhile, a firmer dollar makes gold, priced in dollars, more expensive for buyers using other currencies. These factors created a tug-of-war in the gold market, where traders are now more focused on shifts in the Fed's expected rate path than daily price fluctuations.

The upcoming release of the minutes from the Fed's September meeting could provide further clarity on the central bank's future moves. Gold traders often monitor real yields, bond yields after accounting for inflation, and the U.S. dollar, as both can quickly influence demand for the metal even when its headline price remains stable.