Gold Prices Surge as Dollar Hits Two-Month Low and Rate Hike Expectations Fade

Gold prices surged for the third consecutive session on August 18, 2026, as the US dollar hit a two-month low and traders scaled back expectations of a Federal Reserve rate hike. Spot gold rose by 0.4% to $4,431.09 per ounce, building on Monday's 1.2% gain.

The probability of a September rate hike collapsed to 33% from 51.2% a month earlier, according to CME FedWatch data, following weak US jobs, inflation, and retail sales reports. Geopolitical tensions escalated as Iran announced a shift to a fully offensive military posture after ceasefire negotiations with Washington stalled.

The dollar index tumbled to the psychologically important 100 level, its weakest in more than two months, making bullion significantly cheaper for buyers holding other currencies. Bart Melek, head of commodity strategy at TD Securities, attributed gold's strength to expectations that the economy is drifting toward a stagflationary environment.

The rally marks a notable turnaround from the pressure gold faced earlier this year. The recent softness in US economic data has now reversed that dynamic, with investors recalibrating their expectations for Fed policy.