Gold Holds Gains as Fed Rate Hike Expectations Fade
Gold prices held firm during Tuesday's trading (August 18) after posting gains for two consecutive sessions. Spot gold traded around US$4,425.80 per troy ounce, having risen approximately 1.5% over the previous two sessions. A weakening US dollar and diminishing expectations of a Federal Reserve interest rate hike served as key supports.
The Dollar Index remained under pressure, touching its lowest level since May following a series of weak US economic data releases. Markets no longer fully price in a Fed rate hike before year-end—a shift from the sentiment just a week earlier.
Meanwhile, the yield on the 30-year US Treasury bond climbed to its highest level in nearly two decades. This rise reflects investor concerns regarding high government spending, surging long-term debt issuance, and inflation risks. Paradoxically, this environment could support gold, as bullion is once again viewed as a hedge against fiscal risks and the government's debt burden.
However, inflation risks stemming from the Middle East remain a potential headwind. President Donald Trump has refused to extend an interim agreement with Iran, while fighting has intensified in Lebanon and shipping disruptions in the Strait of Hormuz persist. Should conflict drive oil prices higher, renewed inflationary pressure could increase the likelihood of tighter Fed policy.
Investor demand and central bank buying—particularly from China—continue to underpin gold. The recent rally has brought the metal back toward its 100-day moving average, having previously broken above that indicator for the first time since April.
Newsmaker Analysis: Gold sentiment remains positive as two major headwinds—a strong dollar and expectations of a Fed rate hike—begin to subside. However, rising long-term yields and the risk of energy-driven inflation continue to limit the rally's upside potential. The market's next focus is on Wednesday's Federal Reserve meeting minutes, seeking clues as to whether upward pressure on interest rates is truly beginning to ease or if there is still a potential for a resurgence.
Source: Newsmaker.id
