Gold Gets Temporary Boost as Investors Settle on Fed Rate Hikes
Investors have finally settled on when the Federal Reserve will raise interest rates again, giving gold a temporary reprieve from its recent decline. The XAU/USD price fell 6% in September, its worst performance since June, but lower odds of Fed rate hikes are helping to support the precious metal.
The drop in probability of a Fed rate hike from 73% to 28% has provided gold with some much-needed breathing room. However, the environment remains unfavorable for XAU/USD, with the US dollar strengthening, US Treasury yields reaching their highest levels since 2002, and Brent hovering near $100 per barrel.
Gold traditionally struggles at the start of a Fed monetary tightening cycle. The futures market expects the federal funds rate to rise from its current 4% to 4.75-5% over the next 12 months, combined with a strong US economy, elevated energy prices, and competition for resources from hyperscalers.