Gold Climbs Above $4,400 as Dollar Weakens and Fed Rate-Hike Bets Fade

Gold moved back above $4,400 an ounce on Monday as the U.S. dollar weakened and traders reduced the odds of another Federal Reserve rate increase in September. Spot gold was up 1.2% at $4,426.52 an ounce by 11:56 a.m. EDT, according to Reuters, and U.S. gold futures for December delivery were 1.1% higher at $4,484.10.

The move put bullion firmly back above a level it had struggled to hold after last week’s advance. The dollar had fallen to its lowest level in more than two months, easing one of the immediate headwinds for gold, and futures markets were assigning roughly a one-in-three chance to a September Fed hike.

That combination matters because gold does not pay interest and is priced globally in dollars. A softer U.S. currency lowers the metal’s cost for buyers using other currencies, and a reduced probability of higher U.S. rates lowers the opportunity cost of holding a non-yielding asset. In its Monday commodities report, Reuters said traders saw a 33% probability of a September rate increase, down from 51.2% a month earlier.

Dollar Slide Gives Gold a Clearer Tailwind

The dollar’s retreat was broad enough to reinforce the move in bullion. The U.S. dollar index fell to its lowest level since early June before recovering to around 99.53 later in the session, Reuters reported separately. The euro reached a two-month high near $1.1583, and the dollar also weakened against the Swiss franc.

The currency move followed a string of softer U.S. economic releases. Nonfarm payrolls fell by 23,000 in July, according to the Bureau of Labor Statistics, compared with an average monthly gain of 34,000 over the prior 12 months. The unemployment rate held at 4.1%, but revisions cut May and June payroll growth by a combined 103,000 jobs from earlier estimates.

Inflation data also reduced pressure on the Fed to move quickly. The consumer price index rose 0.1% in July after falling 0.4% in June. Core CPI, excluding food and energy, rose 0.2% for the month. On a 12-month basis, headline inflation slowed to 3.4% from 3.5%, and core inflation eased to 2.5% from 2.6%.

Retail sales added another sign of cooling demand. The Census Bureau said July retail and food-services sales fell 0.6% from June to $763.6 billion, the first monthly decline in nine months according to Reuters’ currency-market reporting. Taken together, the employment, inflation and spending data weakened the case for an immediate rate increase, even though inflation remains above the Fed’s 2% goal.

Fed Hike Bets Fade, but the Policy Debate Is Not Settled

The shift in market pricing is important because the Fed’s July meeting showed a much more divided backdrop than the latest futures probabilities suggest. The Federal Open Market Committee kept the federal funds target range at 3.5% to 3.75% on July 29, but the decision passed by a 9-3 vote. Beth Hammack, Neel Kashkari and Lorie Logan dissented because they preferred a quarter-point increase.

That vote means the current story is not simply that investors expect easier policy. The more precise shift is that markets have become less convinced the Fed will tighten again soon. Reuters’ gold-market update put the September hike probability at 33%, while a separate Reuters currency report later in the day cited 30.6%, down from 52.2% a week earlier. Those figures can move with futures prices during the trading day, but both point in the same direction: expectations for a near-term increase have been cut sharply.

The Fed still has reasons to be cautious. Its July statement said inflation remained elevated relative to the 2% objective, in part because of supply shocks and higher energy costs. The July CPI report also showed energy prices were still 14.7% higher than a year earlier even after a 1.5% monthly decline. For gold, that leaves a mixed macro setup. Softer growth and less aggressive rate expectations are supportive, but renewed energy inflation could revive pressure for tighter policy and strengthen the dollar.

The next scheduled policy clue arrives Wednesday, August 19, when the Fed releases minutes from its July 28-29 meeting at 2 p.m. EDT. Those minutes will not include the subsequent July payroll, CPI and retail-sales releases, but they should show how officials were weighing inflation risks at a meeting where three policymakers wanted to raise rates. The September 15-16 FOMC meeting remains the next rate decision.

Gold’s August Rebound Has Put $4,500 Back in View

Monday’s move also extends a sharp recovery in gold itself. Reuters reported in a separate analysis that bullion was up about 9% in August to around $4,400 after a volatile first half of the year. Gold had reached a record $5,595 an ounce in January before falling below $4,000 in June as the U.S.-Israeli war with Iran disrupted markets and investors sought liquidity.

The rebound has brought technical resistance back into focus. Reuters cited the 200-day moving average near $4,504 as an important barrier. With spot gold at $4,426.52 late Monday morning, the metal was less than $80 below that level. A move through $4,500 would therefore carry both psychological and technical importance, but the current advance still depends heavily on the same factors that drove Monday’s gain: the dollar, rate expectations and the path of energy prices.

There are also signs that demand has improved without becoming one-sided. Reuters said gold-backed exchange-traded funds added about $7 billion in the first half of August, bringing assets under management to roughly $582 billion, citing World Gold Council data. HSBC precious-metals analyst James Steel told Reuters that the scale of the rebound suggested central banks or sovereign wealth funds may have been active, but he explicitly described that as an inference rather than confirmed buying.

For now, gold has regained the $4,400 level with a macro backdrop that is friendlier than it was a few weeks ago. The dollar is weaker, the probability of a September rate increase has fallen sharply, and the latest U.S. data have given traders more reason to question how much additional tightening the economy can absorb. Wednesday’s Fed minutes are the next concrete test of whether that repricing can hold.