Gold Stuck Between $4,200 and $4,500 as Fed Pause Bets Clash with Energy Risks

Gold prices have been maintaining a narrow trading range between $4,200 and $4,500 due to expectations that the Federal Reserve will hold interest rates steady through the end of the year. This anticipation has led to increased speculation about the US Dollar's downward trajectory, causing asset managers to build long positions in Gold.

The sharp decline in inflation and employment data has convinced traders that the Fed will not raise interest rates this year. However, energy price volatility originating from tensions in the Middle East poses a significant risk, potentially spiking Oil prices and reigniting inflation concerns. If this happens, it could force the Fed to re-evaluate its rate path, leading to higher interest rates.

TD Securities strategists project that Gold will remain range-bound within the $4,200, $4,500/oz corridor into early 2027 due to the risk of higher interest rates driven by energy market uncertainty. Once inflation pressure subsides, the metal is expected to break out towards higher levels later in 2027.