Gold: Fed inflation focus and volatility risk – Commerzbank

Commerzbank’s Thu Lan Nguyen notes Gold has stabilised around USD 4,400 per ounce, with markets now focused on upcoming US inflation data as the key driver for the Federal Reserve’s September decision. Futures imply roughly a 60% probability of a rate hike, leaving room for a sharp repricing and a potentially volatile week for Gold prices.

Inflation print and Fed expectations

"The price of gold has stabilised at around 4,400 USD per troy ounce in recent days. Last Friday’s surprisingly strong US labour market data only caused a brief dip."

"The reason is that this week’s upcoming US inflation data is seen as the decisive factor for the Fed’s forthcoming interest rate decision. Fed Governor Christopher Waller also more or less confirmed this recently."

"At present, the market is therefore quite divided regarding the Fed’s September meeting and is pricing in a roughly 60% chance of an interest rate hike."

"As such, there is still considerable scope for a correction in interest rate expectations should the inflation data surprise significantly on the upside or downside."

"A potentially volatile week therefore lies ahead for the price of gold."