Gold’s three-day advance is unfolding alongside a pullback in September Fed rate hike odds, which have slipped to around 55% from closer to 68% a day earlier, illustrating how directly the metal is trading off shifting expectations for the path of US policy rather than off a single catalyst. The move also sits on top of a structural bid from central bank buying that has underpinned prices through much of the year, with reserve managers such as the Bank of Korea signalling fresh purchases and geopolitical risk cited as a driving factor. Continued inflows into Chinese gold-backed ETFs suggest institutional demand in Asia remains a persistent support above the $4,000 level even as the immediate risk premium tied to the Strait of Hormuz starts to unwind. With gold holding a floor above $4,000 despite the prospect of easing Middle East tensions, the metal’s resilience points to buyers viewing the current level as fair value given still-elevated inflation and lingering uncertainty over the final shape of any Hormuz agreement.
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Earlier this week:
Gold pushed higher for a third consecutive session as hopes for a Hormuz reopening deal reduced inflation risk and lowered the odds of a near-term Fed rate hike.
Summary:
- Gold rose for a third consecutive day, trading higher in Asia and holding near $4,100 an ounce
- The advance reflects easing inflation concerns tied to reports of an imminent US-Iran-Oman interim deal to reopen the Strait of Hormuz, reducing the likelihood of the Federal Reserve raising interest rates
- Markets have trimmed the implied probability of a September Fed rate hike to around 57%, down from around 67% a day earlier
- Gold-backed exchange-traded funds in China continued to attract inflows, with institutional investors maintaining support for bullion above the key $4,000 level
- The advance follows a report from Axios that the US, Iran and Oman are nearing an interim deal targeting a Wednesday announcement to reopen the strait and restore the US-Iran ceasefire
- Central bank buying has remained a persistent source of demand this year, with institutions including the Bank of Korea recently signalling a return to gold purchases, citing geopolitical risk as a motivating factor
- Gold has traded volatile but broadly elevated through 2026, having earlier touched record highs above $5,500 an ounce in January before retreating
Gold climbed for a third consecutive session on Wednesday, trading higher in Asia and holding near $4,100 an ounce, as reports of an imminent deal to reopen the Strait of Hormuz eased concerns about the inflation outlook and reduced the odds of a near-term Federal Reserve interest rate increase. The advance builds on gains seen earlier in the week as diplomatic signals around the strait have progressively strengthened, culminating in reports that the US, Iran and Oman are nearing an interim agreement targeting a Wednesday announcement to restore the US-Iran ceasefire and resume nuclear talks.
The precious metal’s rally has coincided with a marked shift in interest rate expectations. Markets have trimmed the implied probability of a September Federal Reserve rate hike to around 57%, down from roughly 67% just a day earlier, as the prospect of easing Middle East tensions has begun to remove some of the inflationary pressure tied to elevated oil prices. Lower expectations for near-term tightening typically support gold, which does not pay interest and tends to benefit when the opportunity cost of holding it declines. Investors are now turning their attention to a fresh batch of US labour market data, including private payrolls figures and Friday’s non-farm payrolls report, for further clues on the Fed’s policy trajectory.
Beyond the immediate geopolitical catalyst, gold’s advance is underpinned by more structural sources of demand. Gold-backed exchange-traded funds in China have continued to attract inflows, with institutional investors maintaining support for bullion above the closely watched $4,000 an ounce level even as some of the immediate risk premium tied to the Hormuz situation has started to unwind. Central bank buying has also remained a persistent feature of the gold market through 2026, with reserve managers around the world continuing to diversify holdings amid ongoing geopolitical uncertainty. The Bank of Korea, for instance, recently signalled plans to resume gold purchases for the first time in 13 years, citing geopolitical risk as a key motivating factor, a move that follows a broader trend of central banks buying gold at a near-record pace in recent quarters.
Gold’s performance this year has been marked by significant volatility. The metal surged to record highs above $5,500 an ounce in January before retreating sharply, dipping below $4,000 an ounce in late June before stabilising and gradually recovering. Even with the recent pullback in geopolitical risk premium, gold remains among the strongest-performing major assets over the past year, reflecting a combination of persistent central bank demand, retail and institutional buying in Asia, and ongoing uncertainty over the durability of any near-term diplomatic breakthroughs in the Middle East. Should the reported Hormuz deal be confirmed and hold, some of the safe-haven bid currently supporting gold could fade, though the underlying structural demand from central banks and Asian investors is likely to continue providing a floor beneath prices.
This article was written by Eamonn Sheridan at investinglive.com.
