Gold Climbs Near 4200 as US Rate Hike Expectations Dim

Gold prices climbed in European trading on Monday, reaching close to the $4,200-an-ounce mark. This rise was driven by lower expectations of a US interest rate hike in October and increased demand for safe-haven assets due to escalating Middle East tensions.

The precious metal rose 0.7% to $4,170.46, up from an opening price of $4,142.33, after hitting a low of $4,124.76. However, gold ended Friday with a 0.85% loss, marking its second decline in three sessions, as higher US Treasury yields weighed on the market. Last week, gold suffered a 3.35% drop, its second consecutive weekly loss, amid weaker investment demand due to elevated global interest rates.

The US Dollar Index surged 0.6% to an 18-month high of 102.54, reflecting broad gains in the US currency. A stronger dollar typically makes dollar-denominated gold less attractive to foreign buyers. The dollar’s advance was supported by elevated US Treasury yields trading near historic levels.

Investors are now awaiting the release of the minutes from the Federal Reserve’s latest meeting this week to reassess expectations for US interest rates. The probability of the Fed leaving rates unchanged in October rose to 80%, while the chance of a 25-basis-point hike fell to 20%. For December, the probability of a rate hike stands at 85%. Tim Waterer, chief market analyst at KCM Trade, noted that weak labor market data reduced expectations for a Fed rate hike in October, providing some support for gold. However, markets still anticipate a broader rate-hiking cycle.