Gold Price Surges to $4,391 as Dollar Weakens and Fed Hike Odds Fall

The gold price continued its upward trend on August 17th, reaching $4,391 as the US dollar weakened and Fed hike odds fell to 30%. The weaker dollar made dollar-priced gold cheaper for buyers, contributing to the price gain. Gold's recovery from the July low of around $4,000 has been supported by softer labor data, potentially longer inflation, resumed inflows into gold ETFs, and extensive central bank buying.

The probability of a September Fed rate hike fell sharply, down from 47% just a month ago, according to CME FedWatch data. This change in monetary policy expectations is driving the price action in gold markets. As the dollar index dropped by 0.1%, gold's non-yielding asset status means lower expected interest rates reduce the opportunity cost of holding gold.

The release of the July Fed minutes on Wednesday will be a key event for gold markets, providing insight into policymakers' perceptions of inflation risks and labor market weakness. China has increased its gold purchases, adding 20 tonnes in July to official sector reserves, which now account for approximately 8% of foreign currency reserves.