Gold Price Soars on Rate Hike Uncertainty

The gold price has surged over 9% in August, and its rebound is gaining traction. A benign July inflation report, softer US employment data, and signs of progress toward reopening the Strait of Hormuz have reduced pressure on the Federal Reserve to raise interest rates.

According to the CME FedWatch tool, the odds of a September rate hike have sunk below 40%. For gold, this distinction matters. Expectations of further tightening had lifted yields and the dollar while undermining demand from rate-sensitive Western investors.

The inflation and labor data have strengthened the case for a pause, though policymakers remain constrained by headline inflation that was 3.4% higher than a year earlier, and 1.4% higher than the Fed's target.