Gold price rebounds as Fed hike bets fall: can bullion race towards $4,500?

Gold edged higher on Thursday as investors reduced bets on an immediate tightening cycle after the Federal Reserve kept interest rates unchanged, though bullion’s next move now hinges on fresh US inflation data.

Spot gold rose 0.3% to $4,076.29 an ounce by 0245 GMT after climbing as much as 2% on Wednesday. August US futures gained 1% to $4,073.60.

The advance followed a 9-3 Fed vote to keep the target range at 3.5% to 3.75%, with three policymakers favouring a quarter-point increase.

The Fed hold weakens the immediate rate threat

Chair Kevin Warsh repeated the central bank’s commitment to price stability but gave investors little guidance on what would trigger the next move.

That ambiguity mattered more for gold than the hold itself.

CME FedWatch pricing showed the probability of a September increase had fallen to about 63% from roughly 81% before the decision.

Marex analyst Edward Meir said the market interpreted Warsh’s remarks as less urgent than expected on the need to raise rates, helping bullion recover despite the Fed’s continued concern over inflation.

Gold typically struggles when real yields rise because it offers no interest.

A reduction in near-term tightening expectations can therefore support the metal even when policymakers maintain a hawkish inflation message.

PCE inflation becomes the next catalyst

Attention now turns to the June Personal Consumption Expenditures report, due at 8:30 am ET on Thursday alongside the advance estimate of second-quarter US gross domestic product.

A firmer-than-expected inflation reading could rebuild September hike bets, lift Treasury yields and strengthen the dollar.

That combination would make gold more expensive for overseas buyers and raise the opportunity cost of holding it.

A softer report would reinforce the post-Fed repricing and could help bullion consolidate above $4,000.

The data will also test whether higher energy costs are beginning to spread beyond fuel.

The Fed said inflation remained above its 2% goal partly because supply shocks had raised prices in sectors including energy.

Geopolitics offers support but may also lift yields

Fresh US strikes on Iranian targets have kept safe-haven demand alive, even as oil surrendered part of Wednesday’s surge and Brent slipped below $90 a barrel.

Tankers continued moving through parts of the region, limiting fears of an immediate collapse in supply.

That creates a difficult balance for gold. Escalation can attract defensive buying, but a renewed oil spike may also worsen inflation and push bond yields higher.

TD Securities analysts see the latest rebound as vulnerable and believe bullion could drift towards $3,900 if the energy shock keeps rate expectations elevated.

The World Gold Council offers a more constructive medium-term view, saying weaker growth, renewed geopolitical stress or lower rate expectations could lift gold towards $4,500.

Silver rose 0.4% to $57.86, palladium gained 1.5% to $1,264.49 and platinum slipped 0.6% to $1,602.34.