Gold prices rise as expectations for October Fed rate hike fade

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Gold prices rise

Highlights

Gold rises 0.35% to $4,185.38 as Fed hike bets ease.
Lower Treasury yields helped gold rebound Thursday.
December Fed policy remains a key risk for bullion.

Spot gold traded at $4,185.38 an ounce, up 0.35%, while gold futures climbed 0.85% to $4,205.40. The gains followed Warsh's appearance at the International Monetary Fund meetings in Bangkok, where he offered no indication that the Fed would raise rates in October, Bloomberg reports.

Warsh remarks reduce pressure on gold

Warsh reiterated the central bank's commitment to price stability but declined to indicate how policymakers might vote at their October 27–28 meeting.Traders responded by cutting the probability of an October rate increase from roughly one-third to about 17%. The shift eased concerns about an immediate rise in borrowing costs, which typically weighs on gold because the metal pays no interest.

Fed raised rates by 25 basis points in September. Policymakers have continued to signal that additional tightening remains possible, although recent comments suggest they are prepared to assess further economic evidence before acting.

Warsh's remarks came shortly before the Fed's pre-meeting communications blackout, leaving investors with fewer opportunities to receive guidance from officials.

Inflation and Treasury yields remain key risks

Gold's recovery followed a 1.6% advance on Thursday, its strongest daily gain in more than two weeks. The rally coincided with selling in technology shares as investors questioned the sustainability of heavy artificial intelligence spending.

Demand for government bonds increased during the selloff, pushing Treasury yields lower and improving the relative appeal of non-yielding bullion.

Those conditions began to change Friday as pressure on equities eased and Treasury yields moved higher. Gold nevertheless remained supported by the reduced likelihood of an October rate increase.

Earlier economic releases had reinforced inflation concerns. September consumer prices exceeded expectations, while producer price and retail sales figures added to uncertainty about the Fed's next move.

The metal was still heading toward a modest weekly decline after struggling with elevated borrowing costs throughout the year.

December policy outlook could determine gold direction

The latest repricing does not eliminate the possibility of further monetary tightening. Investors must now distinguish between an October pause and a lasting shift in the Fed's policy stance.

Gold remains sensitive to that distinction. Higher interest rates can lift Treasury yields and strengthen the dollar, making bullion less attractive to investors. Conversely, expectations of a prolonged pause could provide support.

The broader backdrop remains difficult. Gold has fallen approximately 20% since the US-Iran conflict began in late February, as rising energy costs intensified inflation concerns and encouraged tighter monetary policy.

Gold's recovery will depend largely on upcoming inflation data and shifting expectations for the Fed's next policy decision, as investors assess the outlook for interest rates and Treasury yields.

We also reported the London gold market strengthens its grip on physical trading amid global reserve shifts.

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