Gold Prices Drift Higher as Dollar-Debasement Fears Linger

Gold prices rose on Thursday as investors remained cautious about the value of their currencies. The precious metal is seen as a safe haven against economic and geopolitical risks, but its appeal can be diminished by rising interest rates.

The US Federal Reserve's decision to expand purchases of older long-dated bonds has contributed to dollar-debasement fears, which have been supportive of gold in the medium term. According to Kelvin Wong, a senior market analyst at OANDA, 'the dollar-debasement narrative... remains supportive of gold in the medium term.'

The market is eagerly awaiting the speech by Fed Chair Kevin Warsh at the annual Jackson Hole symposium, as it will provide clarity on how the Fed will navigate the current economic landscape. If Warsh does not provide specific forward-looking monetary policy guidance, current market pricing for rate hikes is likely to remain largely unchanged.

The CME FedWatch Tool indicates that markets assign a 36.5% probability to a September US rate hike and a 72.7% chance by December. This, combined with the pause in the decline of annual US inflation from a recent peak, may add to the central bank's debate over whether interest rates should be lifted or held steady.