Gold rises above $4,180 as investors reassess Fed policy outlook

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Gold rises above $4,180

Highlights

Spot gold rises 0.49% to $4,186 an ounce.
Fed rate hike expectations weaken after Warsh remarks.
Lower yields and ETF inflows support gold demand.

Spot gold climbed 0.49% to $4,186.03 an ounce, while December gold futures gained 0.62% to $4,207.00. The advance followed a shift in expectations for the Fed meeting next week, after Warsh's comments suggested policymakers could leave rates unchanged. Traders reduced the implied probability of a quarter-point increase to less than one in six, Bloomberg reports.

Fed policy expectations support gold prices

Warsh's remarks helped reverse a rise in the dollar that followed stronger-than-expected U.S. inflation data last week. The inflation figures had encouraged traders to anticipate further monetary tightening, putting pressure on gold as higher interest rates increase the appeal of interest-bearing assets. Expectations shifted after the Fed chair's comments, allowing bullion to recover much of its recent decline.

The bond market also provided support as Treasury yields moved lower amid renewed concerns about technology valuations. A selloff in artificial intelligence-related stocks raised questions about the sustainability of heavy investment in computing infrastructure. Those developments encouraged investors to reconsider their exposure to riskier assets, benefiting gold despite uncertainty over the longer-term interest-rate outlook.

Safe-haven demand strengthens gold market

Gold has remained above $4,000 an ounce since August, supported by investors seeking protection against financial and geopolitical uncertainty. The metal has attracted steady interest from exchange-traded funds, which have recorded 13 consecutive weeks of inflows. That demand has helped stabilize prices following the sharp decline earlier this year.

Despite the recovery, bullion remains roughly 20% below its level before the U.S.-Iran conflict began in late February. Meanwhile, the U.S. Dollar Index rose 0.15% to 101.78.

Interest rate outlook remains central to gold

The latest advance leaves gold sensitive to upcoming U.S. economic data and the Fed's next policy decision. Although expectations for an October rate increase have weakened, traders still see a substantial possibility of further tightening before year-end. Persistent inflation could revive those expectations and place renewed pressure on bullion.

For now, lower bond yields and continued demand for defensive investments are helping gold recover. The difference between spot prices near $4,186 and December futures above $4,200 also reflects the market's focus on conditions in the coming months. Whether the rally continues will depend largely on inflation trends, Treasury yields, and signals from Federal Reserve policymakers.

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

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