Gold Surges as Traders Doubt Fed's Ability to Raise Rates

Gold prices have been climbing as traders lose confidence in the Federal Reserve's ability to raise interest rates without hurting the economy. The latest inflation data shows a soft print, with consumer prices rising just 0.1% in July and annual inflation easing to 3.4% from 3.5% in June.

This is a problem for the Fed, which has been threatening rate hikes to combat inflation. But if it hikes rates too high, it risks tightening into a slowdown. If it pauses while oil prices remain volatile, it risks looking late again if energy prices leak back into headline inflation.

The market has already reacted to this uncertainty, with expectations for a 25 basis point increase at the Fed's September meeting falling from 55% to 36.1%. Central banks, on the other hand, are buying gold in record amounts, with the World Gold Council reporting that central bank net purchases reached 289 tonnes in the second quarter of 2026.