FX.co ★ Gold Slightly Up as Fed Rate-Hike Bets Fade

Gold inched above $4,160 an ounce on Tuesday as ebbing expectations of a Federal Reserve rate hike this month helped offset headwinds from a firm US dollar and elevated Treasury yields. Market participants have scaled back October hike bets after September job growth came in weaker than forecast and payroll figures for the prior two months were revised lower. According to the CME FedWatch Tool, traders now assign only about a 20% probability to a rate increase this month, though they still see nearly a 70% chance of a hike in December. Higher interest rates increase the opportunity cost of holding non-yielding assets such as gold.

The dollar, however, stayed near an 18‑month high, buoyed by rising US government debt levels, widening fiscal deficits and political uncertainty across parts of the Eurozone, all of which have weighed on the euro. At the same time, oil prices declined on Tuesday as robust crude exports from the Middle East and an emergency stockpile release by the G7 eased worries over potential supply disruptions.