Gold prices (XAU/USD) rebounded to around $4,470 during the early Asian session on Friday, extending their recovery as expectations for a Federal Reserve rate hike in September diminished following recent comments from Fed Governor Christopher Waller [1]. Earlier in the week, hawkish remarks from Fed Chair Kevin Warsh at the Jackson Hole symposium had increased the likelihood of a September rate hike, putting pressure on gold. However, Waller's statement that he expects 'reasonable' inflation readings next month led traders to scale back their bets on further monetary tightening [1].
According to the CME’s FedWatch tool, the probability of a quarter-point rate hike in September dropped to 50.2% after Waller’s speech, down from 63.2% previously [1]. Saxo Bank Head of Commodity Strategy Ole Hansen noted that gold remains highly sensitive to shifts in market expectations for the September Fed meeting, given the lack of forward guidance from the central bank [1].
Market participants are now focused on the upcoming US August Nonfarm Payrolls (NFP) report, expected to show a 56,000 job addition and an unemployment rate holding steady at 4.1%. A stronger-than-expected jobs report could boost the US Dollar and weigh on gold prices, while weaker data may support further gains in the precious metal [1].
Waller's message was described as moderately hawkish but data-dependent, with the FXS Speechtracker score at 6.1, slightly softer than the historical average of 6.3. The FXS Fed Sentiment Index fell by 2.06 points to 125.38, indicating a modest pullback in perceived hawkishness, though the overall policy tone remains above the neutral mark [1]. HSBC analysts believe that a further US rate increase is unlikely in the near term, provided core inflation remains contained [1].
CONCLUSION
Gold's rebound above $4,450 reflects easing Fed rate hike expectations following Waller's data-dependent stance. Market attention now turns to the US jobs report, which could influence both the Dollar and gold prices. Analysts suggest the Fed may remain on hold if inflation stays contained, supporting a cautiously optimistic outlook for gold.