Gold Surges Above $4,400 as Weakening USD Meets Rate Hike Risks
Gold prices have extended gains above $4,400 as a weakening US Dollar meets risks of an impending Federal Reserve rate hike. The precious metal has been recovering from a nearly four-week low of $4,282 and is now building on the momentum for the second straight day.
The US Dollar's decline is attributed to retreating US bond yields, which undermine the greenback's value. However, firming Fed rate hike expectations and inflation risks stemming from higher energy prices could limit the USD's corrective slide and cap the non-yielding bullion.
According to CME Group's FedWatch Tool, traders are pricing in around a 62% chance that the US central bank will hike rates at its upcoming September 15-16 policy meeting. The expectations were lifted by Fed Chair Kevin Warsh's hawkish remarks last Friday, which have rekindled inflationary pressures.
Meanwhile, crude oil prices trade near their highest level since July 24, touched on Wednesday, as tensions between the US and Iran continue to escalate. US President Donald Trump has stated that he is prepared to launch another attack on Iran, keeping the geopolitical risk premium in play.