Gold rebounded nearly 5% from Wednesday's low of $4,282, trading 2.2% higher at around $4,490 as of September 3 evening, according to Business Standard. The yellow metal received strong support from comments by Fed officials indicating that inflation continues to moderate and rates can remain unchanged if the trend persists. Fed Governor Christopher Waller said his decision on rates will be heavily influenced by the upcoming CPI inflation data on September 9, and he is willing to hold rates steady should inflation show a downtrend. Waller added that price pressures were showing signs of easing, providing clearer guidance for markets about the Fed's near-term policy stance. The probability of the Fed hiking rates at its September 16 meeting has declined to a coin toss (50%), down from 65% seen a couple of days ago as traders pared their rate hike bets following comforting speeches from Fed officials.
Crude oil prices rallied for the fourth straight day on Thursday as Iran targeted US bases in Kuwait and the UAE in reaction to US strikes on Wednesday. According to Business Standard, dated Brent oil is approaching $100 on escalating tensions between Iran and the US as the two countries resumed exchanging strikes after a month. Israeli defence minister Katz warned that Israel will send Iran to stone age if attacked, floating a possibility of Iran attacking Israel on upcoming Jewish holidays. Israel's PM Netanyahu said that Israel controls 60% of Gaza and they are not retreating, adding to regional tensions. The surge comes as traders focus on geopolitical developments that could impact global oil supply chains, with the Middle East remaining a key source of concern for energy markets.
Federal Reserve Governor Christopher Waller indicated on Thursday that he would support holding interest rates steady at the September policy meeting, providing significant relief to markets that had been betting on a potential rate hike. According to CNBC TV18, Waller said at an event on Thursday that his monetary policy vote will be "heavily influenced" by the inflation data for the month of August that will be released next week. Waller added that in case he sees progress on inflation moving towards the Fed's 2% target, he is prepared to vote for no change in interest rates. He also said that he is seeing some signs of disinflation as higher energy costs have not spilled over broadly into other sectors, providing clearer guidance for markets about the Fed's near-term policy stance. He expects "reasonable" CPI and PPI readings over the next month, with the US reporting PPI data for August next Thursday, September 10, followed by the CPI print on Friday, September 11.
Traders now see about a 54% chance of a rate hike when policymakers meet on September 15-16, down from about 62% before Waller's comments, according to The Hindu BusinessLine. "I think traders at the moment are looking at the Fed being less aggressive with rates," said Bob Haberkorn, senior market strategist at StoneX. "More and more traders are coming around to the idea that (the Fed) could do one rate hike, but there probably isn't much more they can do with rates after that." Lower Treasury yields added support to bullion by reducing the opportunity cost of holding non-yielding gold, while the US dollar also fell, making greenback-priced bullion more affordable for overseas buyers. Although gold is typically seen as an inflation hedge, higher interest rates tend to diminish the non-yielding metal's appeal, making the current rate hold scenario particularly supportive for precious metals.
Mirae Asset ShareKhan's Praveen Singh identified gold's key support levels at $4,450, $4,358, and $4,300-4,330, while resistance is seen at $4,533, $4,575, and $4,650. According to Business Standard, gold ETFs have been receiving strong inflows supporting prices, with holdings currently at 99.15 MOz, up 0.20 Moz YTD (6.22 tons). Registered COMEX gold inventory stands at 15.10 Moz, up ~28.30 tons from the cycle low of 14.19 Moz noted on August 7. The main threat to gold remains a sharp rise in crude oil prices, which could strengthen inflation expectations and temper expectations of policy easing. In the absence of a strong payrolls surprise and a sustained oil rally, gold is likely to trade sideways, with pullbacks toward $4,400 may present tactical buying opportunities.
