Gold bounces off eight-week low; not out of the woods amid rising Fed hike bets

Gold prices briefly rebounded from a recent eight-week low of $4,100, but are not out of danger amid expectations of further Federal Reserve rate hikes. The US Federal Reserve (Fed) recently raised interest rates by 25 basis points for the first time in three years, signaling a commitment to combat persistent inflation. This hawkish stance from the Fed, coupled with elevated bond yields and geopolitical tensions, keeps the US Dollar (USD) near a two-month high, which puts downward pressure on gold.

Committee member Nicholas Cook delivered a slightly more hawkish-than-usual speech, with a FedWatch Tool suggesting a 70% chance of another rate hike in October. Despite Cook's acknowledgment that AI-driven productivity could lead to some disinflation, he stressed that these gains may not be enough to offset inflation this year.

The FXS Fed Sentiment Index fell by 0.63 points to 146.89, showing a modest pullback in hawkishness. Meanwhile, geopolitical risks, such as the ongoing conflict between Iran and the US, continue to support crude oil prices and inflationary pressures, pushing up US bond yields. In light of these developments, traders are advised to wait for important US macroeconomic releases, including the upcoming Personal Consumption Expenditures (PCE) Price Index and final Q2 GDP print, before making significant bets on the gold price.