Gold rises above $4,000 as traders scale back Fed rate hike expectations

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Gold rises above $4,000

Highlights

Gold rebounds above $4,000 after a weekly selloff.
Fed rate hike odds fall below 10% for this week.
ETF outflows and inflation remain key risks.

Spot gold rose 0.51% to $4,016.13 an ounce, while December gold futures gained 0.54% to $4,029.65. The recovery came as traders reassessed the outlook for U.S. borrowing costs and financial markets stabilized following last week's turbulence, Bloomberg reports.

Fed policy expectations support gold

Investors are now assigning less than a 10% probability to an interest rate increase at the Federal Reserve meeting later this week. Expectations had previously shifted toward tighter policy after stronger-than-anticipated inflation readings, but subsequent comments from central bank officials reduced the likelihood of immediate action.

Lower expectations for interest rate increases generally support gold because the metal offers no yield. However, elevated energy prices remain a concern, with traders still considering the possibility of additional monetary tightening before year-end. The conflict involving the U.S. and Iran has complicated the outlook by disrupting oil supplies and sustaining inflationary pressure.

Technology selloff adds to market volatility

Gold lost more than 4% last week and briefly fell below $4,000 an ounce, reaching its lowest level since July. The decline coincided with a broad retreat in artificial intelligence-related stocks as investors questioned the financing requirements and potential returns of large technology investments.

The equity selloff also triggered demand for liquidity, prompting some investors to sell bullion while shifting money toward government bonds. Gold has fallen roughly a quarter since the U.S.-Iran conflict began in late February, reflecting the combined pressure of higher interest rates and changing investment flows.

Selling extended to gold-backed exchange-traded funds, whose holdings declined by more than 10 metric tons on Friday. The withdrawal followed another reduction the previous day, interrupting a period of sustained accumulation that had continued despite falling bullion prices.

Gold recovery faces a test from the Fed

Monday's advance coincided with a modest recovery in equities and a pullback in oil prices from recent highs. The U.S. Dollar Index also edged lower, offering additional support to dollar-denominated bullion. Silver strengthened slightly after suffering a substantial weekly decline, while platinum and palladium remained under pressure.

The upcoming Federal Reserve decision will help determine whether gold can sustain its recovery. Although reduced expectations of an immediate rate increase have eased some pressure, persistent energy-driven inflation and continued withdrawals from gold funds could limit further gains.

As we previously reported, Singapore vault operator expands bullion storage for foreign investors.

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