Gold Price Hesitant to Rally Amid Hawkish Fed and Middle East Tensions
The price of gold (XAU/USD) has struggled to gain momentum despite a modest uptick in the Asian session. The precious metal remains below its weekly high, reached on Thursday, due to a mix of factors. US bond yields have retreated from multi-year highs, which helped alleviate concerns about inflation and supported the dollar. However, the Federal Reserve's (Fed) hawkish stance has kept gold bulls hesitant.
The Fed raised interest rates for the first time since 2023 at its September meeting, and officials expect another rate hike this year. This has narrowed US rate differentials relative to G-10 peers, which could underpin the dollar going forward. UOB Group analysts see upside risks to their USD forecasts against both G-10 and Asian currencies.
Traders are also watching for further developments in the Middle East crisis, which is fueling worries about energy-driven inflation and supporting prospects for Fed tightening. The CME Group's FedWatch tool shows a 54% chance of another rate hike at the October meeting and an 88% probability in December.