Gold Treads Water as Rate Hike Bets Keep Markets on Edge

Gold prices have been stuck in a tight range as investors weigh the possibility of another Federal Reserve interest rate hike, keeping the precious metal on edge. Spot gold traded near $2,020 per ounce during European hours, hovering within a narrow band as traders digested recent comments from Fed officials and awaited key inflation data.

The Federal Reserve has kept its benchmark rate at 5.25%-5.50% since July 2024, but recent statements suggest that another hike cannot be ruled out if inflation proves sticky. According to the CME FedWatch tool, market pricing currently implies a 35% probability of a 25-basis-point hike at the March meeting, up from 20% a month ago.

Central bank buying and persistent geopolitical uncertainties are limiting downside risks for gold prices. In fact, central banks added 1,037 tonnes of gold in 2024, the second-highest annual total on record. This structural demand provides a floor under prices.