Gold Prices Stuck as Fed Rate Hike Odds Skyrocket to 64.5%

The gold price has been affected by the recent de-escalation of tensions between the US and Iran, but it hasn't reacted as expected. Instead of selling off or rallying, gold prices opened up 0.7% and then faded to settle into a range that has held for weeks.

This is unusual behavior for a safe-haven asset like gold, which typically sells off when a war risk premium comes out of the market. However, the Iran conflict has been bearish for gold in 2026 due to higher crude oil prices feeding inflation expectations, which in turn drive rate projections and crush non-yielding metals like gold.

Physical markets have shown similar inertia, with Indian gold prices printing ₹14,421 per gram, down ₹1 from the prior session. The spot price of gold has also been stable, sitting at $4,051, up $13 versus the July 31 comparison and $688 above the level of a year ago.

The real challenge for gold is the Fed's decision to hold rates in July, with a 9-3 vote and three regional bank presidents dissenting and favoring an immediate hike. This has led to a 64.5% probability of a rate hike at the September meeting, driving up real yields and making it harder for gold to compete.

Deutsche Bank's research analysts Michael Hsueh and Bryant Xu believe that gold remains in an explosive phase of price behavior, with their models pointing to fair value near $4,700 an ounce by year-end. They argue that regime persistence beats mean reversion here, despite the statistical framing indicating substantial downside.