Fed Rate Hike Expectations Dominate Gold Prices, Bulls and Bears Battle at $4,400

　　Source: Xinhua Finance

　　Xinhua Finance, Beijing, September 8 — Spot gold continued last weekend’s trend of correction, with a fierce tug-of-war between bulls and bears around the $4,400/ounce mark. Under the interplay of multiple forces, the gold market is at a key point for short-term direction choice, as buying support appears below and selling pressure appears above, with market sentiment oscillating between heightened rate hike expectations and long-term allocation demand.

　　The release of the US August non-farm payroll data last Friday was the main trigger for the recent weakness in gold prices. The number of new jobs added during the month reached 162,000, far exceeding general market expectations, while the unemployment rate held steady at 4.1%, demonstrating the resilience of the US labor market and quickly reversing views on the Federal Reserve's monetary policy path. After the data was released, the probability of a 25 basis point rate hike by the Federal Reserve in September jumped from about 50% to around 60%. Rising expectations for rate hikes directly pushed US Treasury yields higher, significantly increasing the holding cost of non-interest-bearing assets like gold, resulting in a short-term drag on gold prices. Although market trading volumes were relatively light on Monday (September 7) due to the US holiday, gold twice saw clear buying support below $4,400/oz, indicating that the market has not fully sided with bears and that there is still strong willingness among funds to buy at key levels on dips.

　　It is worth noting that the recent escalation of geopolitical conflicts in the Middle East has not triggered safe-haven buying in gold as during traditional cycles; instead, it has reinforced the logic for rate hikes through the channel of rising energy prices, exerting net downward pressure on gold. Since the weekend, the tit-for-tat attacks between the US and Iran targeting shipping have intensified, reducing the ship traffic through the Strait of Hormuz to the lowest level since May and driving up international oil prices. As a key chokepoint for global oil and gas transport, the turmoil in the Strait of Hormuz has directly heightened concerns about sticky inflation, and the resulting inflationary pressures may strengthen the Federal Reserve’s tightening stance. Under the current pricing logic in markets, the effect of oil price-driven heightened rate hike expectations has outweighed the safe-haven attribute of geopolitics, so gold’s traditional safe-haven function has temporarily given way to the main rate-setting narrative. Even as conflicts between Israel and southern Lebanon reignited, there was no notable safe-haven buying, with the market rather inclined to view the geopolitical conflict as a catalyst for more hawkish policy.

　　In contrast to the short-term trading logic, long-term gold purchase demand is providing solid base support for gold prices. According to the latest data released by the People's Bank of China, as of the end of August, China’s gold reserves increased by 650,000 ounces compared to the previous month, marking the 22nd consecutive month of accumulation and bringing the total to 76.73 million ounces. This sustained accumulation is not driven by short-term profit-seeking trades, but is a strategic move to optimize the structure of reserve assets and hedge against dollar asset risks, with stability and persistence far greater than speculative funds. This official, long-term demand plays a bottoming role during gold price pullbacks, and is an important support force that cannot be ignored when evaluating the medium- to long-term outlook for gold.

　　Overall, the gold market currently sees a relatively balanced tug-of-war between bulls and bears, with support near $4,400/oz and resistance above $4,550/oz forming a short-term trading range. The upcoming releases of US PPI and CPI inflation data this week will be key catalysts to break the deadlock. If the inflation data remains high, rate hike expectations could intensify further and put near-term correction pressure on gold prices; if inflation shows signs of easing, gold may see some breathing room and test the upper resistance again. Going forward, attention should also be paid to the evolving situation in the Strait of Hormuz, statements from Fed officials, and potential changes at the policy level, in order to navigate the rhythm between short-term fluctuations and long-term trends.

　　(Author: Wang Shenghao, Senior Analyst at Zhongzhou Futures, Investment Advisory License Number: Z0021754)

Editor: Zhu Henan