Gold Prices Rebound on Technical Correction Amid Fed Rate Hike Expectations

Gold prices experienced a technical rebound on Tuesday, recovering some of the losses from Monday's nearly 4% plunge. Spot gold rose 0.7% to $4,142.89 per ounce, but failed to reclaim its 100-day moving average.

The recovery was constrained by mounting expectations of Federal Reserve rate hikes, with a strengthening US dollar and elevated U.S. Treasury yields exerting dual pressure on non-yielding gold. According to the CME FedWatch tool, markets now price in a 68% probability of a Fed rate hike in October and a 95% probability by December.

Peter Grant, vice president and senior metals strategist at Zaner Metals, characterized the rebound as merely a technical correction, noting that gold still faces considerable headwinds. 'Today's move is simply a correction of yesterday's decline,' he said. 'I still think gold faces some fairly significant headwinds.'

Grant emphasized that rising market expectations for further Federal Reserve monetary tightening have kept the dollar firm and U.S. Treasury yields elevated, capping gold's upside potential.