Gold rose toward $4,210 an ounce after Wednesday's softer-than-expected August inflation report cut the odds of an October Fed rate hike, then gave back much of that move. The reversal breaks with a September pattern in which gold repeatedly shrugged off bad news, raising questions about whether positioning or demand for the metal has changed.
Gold reverses after an inflation-driven rally
Gold's failure to hold Wednesday's gains marks a shift in how the market is processing macroeconomic news. Spot gold moved higher toward roughly $4,210 an ounce after the August headline PCE index rose 0.3% month over month, below the 0.4% consensus. Core PCE increased 0.2% over the same period. But gold pulled back later in the session even as the fundamental backdrop turned more favorable for bullion.
The report cut the odds of another Federal Reserve rate hike in October. According to CME FedWatch pricing cited by Reuters, the probability of an October increase fell to around 37% from 45% before the release. Treasury yields moved lower and the dollar weakened, reinforcing the case for gold. Yet the metal could not convert that combination into sustained upside momentum.
September's pattern flips
Throughout September, gold showed resilience against developments that should have hurt a non-yielding asset. Inflation stayed elevated, Treasury yields surged, and the Fed delivered a rate hike, yet dip buyers kept stepping in. On September 10, stronger inflation data pushed rate hike expectations higher and gold initially fell more than 1%, only for subsequent sessions to show strong buying despite the deteriorating rates backdrop.
Wednesday presented the opposite setup. New York Fed President John Williams had already said there was no urgency to raise rates again immediately and suggested only one additional increase might be necessary this year. Together with the softer inflation print, that eased the hawkish rates narrative — yet gold struggled to advance.
The Fed still holds a hawkish bias
The data were not uniformly dovish. Consumer spending increased 0.9% in August, showing demand held up despite elevated rates. The Fed's policy rate stands at 3.75% to 4.00%, above its 2% inflation target, and the central bank has not abandoned its tightening bias.
Gold's resilience to bad news paired with its muted response to good news points to a change in positioning or demand.
Source: Investing.com
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