Gold prices surged to their highest level since early June, reaching USD 4,450 per troy ounce, as markets scaled back expectations for further interest rate hikes by the Federal Reserve, according to Commerzbank’s Carsten Fritsch [1]. Since the start of the month, gold has risen by up to 10%, a move attributed to the reversal of previously excessive expectations regarding Fed rate increases [1]. At the end of July, Fed Funds futures were pricing in a year-end Fed rate of 4%, but this figure has since dropped to 3.86%, indicating that 14 basis points of anticipated hikes have been removed from market expectations [1].
Fritsch notes that the probability of a September rate hike has diminished, further supporting the bullish outlook for gold [1]. Despite a brief pullback, with prices falling to USD 4,320 per troy ounce, Commerzbank maintains that gold retains further upside potential as the Fed is not expected to raise rates [1].
Another key factor supporting gold prices is renewed buying interest from ETF investors. According to Bloomberg data cited by Fritsch, ETF investors have purchased gold for six consecutive trading days, marking the longest period of uninterrupted inflows since April. These inflows total almost 21 tons [1].
The combination of reduced Fed tightening expectations and sustained ETF inflows is seen as a positive backdrop for gold, although price movements may not be linear, as evidenced by the recent pullback [1].
CONCLUSION
Gold has rallied sharply on fading Fed rate hike expectations and renewed ETF inflows, reaching its highest price since early June. Commerzbank sees further upside potential for gold, supported by a less hawkish Fed outlook and sustained investor demand.