Gold Prices Rebound Past $4,400 as Rate-Hike Odds Cool Down

Gold prices have rebounded past $4,400 as the odds of a September rate hike have cooled down. The recent soft ADP jobs data and dovish Federal Reserve commentary have reduced market expectations of a rate increase at the September 15-16 FOMC meeting.

The August US nonfarm payrolls report is due on Friday, with gold trading near $4,436 at press time, up about 1.1% on the day. The metal first slid to a three-week low of $4,282.45 in the Asian session on Wednesday before rebounding about 1% to close near $4,388.

Kevin Smith, founder of Crescat Capital, believes that the Fed is 'effectively unable to fight and control inflation', arguing that fiscal imbalances have pushed the US into a 'fiscal dominance' era. He models global M2 money supply growth at around 7% per year, with central-bank gold buying of roughly 1,000 tonnes a year.

The week's key event is the US nonfarm payrolls report on Friday, which will further influence market expectations of a rate hike and gold prices. A weak official payrolls print would give gold a clear run at $4,489 and the 200-day MA near $4,528, while a strong report would cement the case for a hike at the September FOMC meeting.