Full Breakdown
Gold Prices Rise but Remain on Track for Weekly Loss Amid Fed Rate Hike Outlook and US-Iran Deal Hopes
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Market Drivers: Fed Policy and Diplomatic Negotiations
On September 25, spot gold increased 0.6% to $4,304.71 per ounce, yet the metal was down about 1.7% for the week. The rise occurred as U.S. Treasury yields climbed and expectations of further Federal Reserve rate hikes grew. The Fed raised its policy rate by a quarter-point—the first increase in three years—and signaled additional hikes, with traders pricing a 71% probability of an October hike and a 95% probability of a December hike, according to the CME FedWatch Tool.
Simultaneously, U.S. and Iranian negotiators in New York were reported to be working toward a deal that would see Tehran reopen the Strait of Hormuz and Washington lift its economic blockade of Iran. Analysts noted that the prospect of such a deal helped buoy gold as oil prices fell and the dollar eased modestly, making bullion more affordable for holders of other currencies.
Data Snapshot
- Spot gold: $4,304.71/oz (up 0.6%)
- Weekly change: –1.7%
- U.S. gold futures: $4,340/oz (up 1%)
- Spot silver: $64.90/oz (up 1.6%)
- Platinum: $1,767.55/oz (up 1.1%)
- Palladium: $1,265.03/oz (down 0.7%)
Traders’ pricing of future Fed moves reflects heightened expectations that higher rates will raise the opportunity cost of holding non-yield-bearing assets such as gold.
Implications for Investors
Higher rates traditionally dampen demand for gold, as investors shift toward yield-bearing assets. Nonetheless, demand in India modestly rose this week, with lower prices attracting buyers ahead of the festive season. Analysts suggested that lingering deficit concerns could revive a “debasement trend” that drives investors toward hard assets, and that persistent central-bank buying may support a stronger fourth-quarter recovery if macroeconomic conditions improve.
Verbatim Quotes
- “Gold finds support today as oil prices pull back on renewed hopes for a US-Iran deal,” — Nikos Tzabouras, a senior market analyst at Jefferies-owned Tradu
- “Lingering deficit fears could revive the debasement trend that drives investors toward hard assets like gold. Alongside persistent central bank demand, the precious metal has a credible case for a strong fourth-quarter recovery, should the macro winds begin to shift,” — Tzabouras. Spot