Gold Rebounds from Two-Month Low as Fed Hike Odds Rise to 70%
Gold prices rebounded on Tuesday after plummeting to a two-month low of $4,141.30 due to higher oil prices and increased inflation concerns. The metal closed at $4,193.20 an ounce, up $24.80 or 0.59%, after opening at $4,150.10. This bounce is small but significant, as it comes on the heels of Monday's massive crash of $145.
The proximate cause of this price drop was the bond market, specifically the 10-year Treasury yield, which traded at 5.264% on Tuesday, near levels not seen since 2007. The Federal Reserve raised the federal funds target range to 3.75% to 4.00% on September 16, and market pricing now suggests a roughly 70% probability of another hike in October.
Gold has lost its rate-cut premium but still maintains a structural bid. Central banks bought a record 288.9 tonnes in the second quarter, and ETFs took nearly $2 billion in the first week of September. The year-end target of $4,900 has not been revised down yet.