Fed Rate Hikes Loom Over Gold and Crypto Rally

Gold and Bitcoin have been gaining momentum in recent months, but their rally may be threatened by looming US Federal Reserve rate hikes. Gold prices are up 7.6% in a month to September 3, while silver has risen 6%. Bitcoin has rallied 26% during the same period, reaching above $80,000.

Historically, alternative assets like gold and crypto have been vulnerable to hawkish Fed stances, which typically push up yields and the dollar index. However, market participants are now pricing in a 58% chance of a rate hike, compared to 45% a month ago. Analysts say this could be an important resistance factor for gold and silver in the near-term.

Despite this, some analysts believe that underlying demand remains supportive, particularly from central banks like China, which have continued to accumulate gold. Central banks' reported purchases totalled around 130 tonnes of gold as of July this year, according to a World Gold Council report.

Geopolitical uncertainty and potential dollar debasement due to a rate hike are also supporting gold prices. Apurva Sheth, head of market perspectives and research at SAMCO Securities, believes that if the Fed hikes interest rates, it would be detrimental to what the Treasury wants to do, keep yields under check and roll over $40 trillion debt at a lower interest rate.