One of the buzzwords that keeps resurfacing every so often is certainly "resilience." Everyone likes it, and it's read as a sign of strength. Looking back at the gold price since last Friday morning, the precious metal has thoroughly earned that label. Gold faced fairly strong headwinds at the start of the week: after further negative news about oil supply from the Middle East over the weekend, oil prices initially jumped 4 percent at the start of the week. This triggered a sharp rise in government bond yields. Yields on long-dated bonds in the US, Germany, Italy, and France all climbed to their highest levels since the mid-to-late 2000s – not to mention their Japanese counterparts. Expectations for further central bank rate hikes continued to build. At the same time, the US dollar appreciated noticeably across the board.
After a brief pullback, gold took a deep breath and climbed back to exactly US$4,350 per ounce by the week's highlight — yesterday's meeting of the US Federal Reserve (the Fed) — the same level at which it had traded on Friday morning.
Fed hike: a hawkish signal
So far, so good. Had I finished writing these lines yesterday at 7:59 p.m., gold bugs would have had more or less reason to celebrate. But then the Fed stepped into the role of party pooper. That the Fed raised interest rates by 0.25 percentage points yesterday had already been priced in by markets with near certainty. However, 16 of 18 Fed officials expect at least one more rate hike to 4 to 4.25 percent by the end of 2026 — there are two more meetings before then. For 2027, Fed officials no longer expect a further rate step — though only by a narrow majority, as eight of the 18 members still see another rate hike in 2027 as likely. The Fed slightly raised its forecasts for both core inflation and economic growth in 2026 and lowered its forecast for the unemployment rate. Policymakers stressed that domestic demand remains resilient, productivity growth is strong, and investment activity is robust.
Rate outlook weighs on gold
This expectation of a, well, resilient US economy may be why many market participants continue to expect that several more rate hikes will be needed to bring inflation back down to 2 percent: interest rate futures markets are now pricing in three more rate steps by September 2027. Yields on two-year US Treasuries rose sharply, and the US dollar also strengthened after the Fed meeting. Both weighed heavily on gold prices.
Gold price: a volatile week
Gold traded at around US$4,350 per ounce on Friday morning last week, then rose to US$4,402 per ounce that same day before giving back all of those gains by the close. The sharp rise in oil prices and yields then triggered a pullback to US$4,254 per ounce on Monday afternoon. Prices recovered back to US$4,350 per ounce ahead of the Fed meeting. After that, they quickly slid to around US$4,235 per ounce. Gold recovered again overnight, however, climbing to just under US$4,320 per ounce before trading at US$4,290 per ounce at 7 a.m.
Xetra-Gold: euro weakness as support
The Xetra-Gold® price benefited from the euro's somewhat weaker exchange rate against the US dollar: during regular trading hours, it initially rose from €120.50 per gram last Friday afternoon to €121.90 per gram, before falling back to around €118.65 per gram on Monday. Yesterday, ahead of the Fed meeting, it was quoted at €121.10 per gram. At the start of trading this morning, it would show €120.55 per gram on the board, assuming the 7 a.m. price still holds.
Outlook: Bank of Japan in focus
Markets are now likely to take stock and digest the outcome of the Fed meeting. Tomorrow, the Bank of Japan is also expected to raise interest rates. Depending on the messaging at the subsequent press conference, this could move markets as well.
I wish all readers a pleasant end-of-summer weekend.