Gold Rises as Rate-Hike Fears Ease

Gold extended its rally for a third consecutive session on Tuesday, as fears of a US interest rate hike next month eased, according to The Hindu Business Line. Spot gold was up 0.2 per cent at $4,424.28 per ounce by 0130 GMT, while US gold futures for December delivery edged 0.2 per cent higher to $4,480.90.

The rise came as the US dollar lingered around multi-month lows against most major currencies. A weaker US currency makes dollar-priced metals less expensive for holders of other currencies, providing a tailwind for bullion.

IG market analyst Tony Sycamore said gold is extending its gains "after last week's soft US economic data, which has raised hopes that the Fed will keep rates on hold this year." Bullion tends to perform well in a low-interest-rate environment as it reduces the opportunity cost of holding non-yielding assets.

The US central bank will keep its key interest rate unchanged next month and through year-end, according to most economists in a Reuters poll. Market pricing for a September quarter-point hike flipped to a near-65 per cent chance of a hold after unexpected job losses in July, lower-than-expected consumer price inflation and weaker retail sales.

Meanwhile, Financial Post reported that gold rose as a selloff in United States bonds eased and the greenback fell, relieving pressure on the precious metal after it shed almost two per cent in the previous session. Bullion climbed as much as 0.9 per cent to trade above US$4,360 an ounce. By 12:30 p.m. in London, spot gold was 0.8 per cent higher at US$4,370.91 an ounce. The Bloomberg Dollar Spot Index declined 0.2 per cent.

Treasuries steadied following a plunge that sent yields on 30-year notes to the highest in almost two decades on Tuesday. Higher borrowing costs are typically negative for gold, which doesn't pay interest.

Fed Minutes and Rate Path in Focus

Market focus will be on the minutes of the Fed's most recent policy meeting, due to be released on Wednesday. The Hindu Business Line noted that investors are awaiting these minutes for fresh clues on the monetary policy path. Financial Post added that the next clues on the Fed's rate path will come later Wednesday with the release of the minutes from its July policy meeting.

Chairman Kevin Warsh's speech to the Fed's annual Jackson Hole symposium is scheduled for next week, according to Financial Post.

Investor Demand and Central Bank Buying

Gold has recovered in recent weeks to trade around US$4,400 an ounce, supported by renewed investor demand and central-bank buying, notably from China, Financial Post reported. A fund manager survey by Bank of America Corp. on Tuesday showed the share who said gold was undervalued hit the highest level since March 2023. Bullion-backed exchange traded funds tracked by Bloomberg added more than 257,000 ounces of gold to their holdings on Tuesday, the biggest daily inflow since April.

Geopolitical Tensions Support Safe-Haven Demand

Sycamore added that gold appears to be regaining its safe-haven status as hawkish rhetoric from Iran helped gold brush off higher yields. The Hindu Business Line reported that Iran will shift to a "fully offensive" military posture because efforts to negotiate a permanent end to the war with the US have stalled, a senior Iranian official told Reuters, as Washington ruled out extending a temporary ceasefire agreement.

However, Financial Post noted that the dimming prospects for a peace deal between the US and Iran may keep a lid on further gains. US President Donald Trump insisted Tuesday that there were no talks ongoing with Tehran, leaving control of the Strait of Hormuz in limbo. The memorandum of understanding the two countries signed in June has expired with no plan to extend it, buoying oil prices. Energy-led inflation puts pressure on the Federal Reserve to raise interest rates, a headwind for bullion.

Other Metals

Among other metals, spot silver rose 0.9 per cent to $66.40 per ounce, according to The Hindu Business Line, while Financial Post reported silver was up slightly at US$63.67 an ounce at 12:30 p.m. in London. Platinum inched 0.2 per cent higher to $1,772.75, while palladium was down 0.3 per cent at $1,330.05, per The Hindu Business Line. Financial Post reported that platinum and palladium gained.