Gold Holds Firm as Dollar Softens Amid Fed Hike Expectations
Gold's recent recovery is showing no signs of slowing down as it holds firm above $4,400 for a second consecutive session. The precious metal is trading with a constructive tone heading into the European session on Thursday, despite remaining capped beneath the $4,450 area.
The US dollar is under pressure from weak US ADP data and lower US bond yields, which has helped extend gold's rebound from a nearly four-week low. However, growing expectations of additional interest rate hikes by the Federal Reserve are tempering enthusiasm for more aggressive bullish positioning in gold.
Market participants are assigning roughly a 62% probability that the Federal Reserve will raise rates at its upcoming September 15-16 policy meeting, according to CME Group's FedWatch Tool. This has led to persisting worries about elevated energy prices reviving inflationary pressures, which is reinforcing the case for further policy tightening.
The ongoing geopolitical tensions between the US and Iran are keeping a risk premium embedded in markets, supporting both oil prices and the US dollar. Analysts remain cautious about calling a definitive bottom for gold in the near term, with many traders waiting for Friday's US Nonfarm Payrolls (NFP) report for clearer guidance on the Fed's policy trajectory.