Gold Surges Towards $4,400 as Fed Rate Hike Odds Plummet

The price of gold has surged towards $4,400 as the odds of a September Fed rate hike have sunk to 30%, according to FXLeaders. This shift in monetary policy expectations is largely driven by weaker US economic data and a decline in inflation expectations.

A softer dollar and weak economic numbers have reduced the likelihood of another interest rate increase this year, creating an opportunity for gold to challenge the $4,400 area. The fundamental picture for gold has been improving, with softer labor data, potentially longer inflation, resumed inflows into gold ETFs, and extensive central bank buying all supporting its recovery from the $4,000 area.

The World Gold Council reported that China added 20 tonnes of gold in July, its largest monthly purchase since October 2023. This is part of a larger trend of central banks increasing their gold reserves, with 45% of central banks surveyed intending to buy gold over the next 12 months.