Gold Rises as Fed-Hike Bets Collapse and US Economic Data Weakens
Gold prices have been on the rise as investors seek safe-haven assets in response to weak US economic data and cooling inflation. Spot gold XAU/USD gained around 0.4% on Monday, trading near $4,391 an ounce. The metal's price is now approaching $4,400, a psychological barrier that could lead to further gains if broken.
The Federal Reserve's rate hike bets have collapsed, with traders assigning only a 30% probability to a September increase, down from 47% recently. This decrease in interest-rate expectations supports gold by reducing the opportunity cost of holding a non-interest-bearing asset.
However, oil prices are complicating the golden setup. Brent crude has risen above $89 after gaining more than 5% last week due to US-Iran talks stalling and Hormuz tanker traffic pulling back sharply. Geopolitical tension can boost gold's safe-haven appeal, but expensive energy may also revive inflation and force central banks to remain tighter.
The coming week will be crucial in determining the direction of gold prices. The Fed minutes on Wednesday are a key catalyst, although they were written before the latest run of weak US data. Traders should focus on how divided officials were over inflation and employment. A hawkish surprise could strengthen the dollar and rearrange gold's breakout.