Gold Faces 86% Fed Hike Odds After ETF Inflow Slowdown
Global gold ETF inflows hit a record $18 billion in August, but Western buying pace is cooling as markets price in a high probability of a Federal Reserve rate hike.
Markets now assign an 86% probability to a 25-basis-point Federal Reserve rate hike in September. This expectation has risen sharply following recent inflation data. The Fed’s potential tightening is becoming the primary obstacle for gold’s next rally.
Global gold ETFs attracted a record $18 billion in net inflows during August. However, the pace of Western buying has slowed as investors reassess interest rate outlooks. Asian demand remains resilient, creating a divided market between tactical Western positioning and persistent Asian accumulation.
Inflation Data Drives Rate Expectations
US non-farm payrolls increased by 162,000 in August. Unemployment held steady at 4.1%. Producer prices rose 0.4% month over month and 5.4% year over year. August CPI also accelerated by 0.4% month over month. Energy costs were a major contributor to these increases.
The CME Group data shows the market has shifted its focus. The likelihood of a September 15-16 meeting hike has increased. This shift follows the release of jobs and inflation reports. The Fed may view recent inflation as driven by temporary energy shocks. Policymakers might also cite rising long-term Treasury yields as evidence of tighter financial conditions.
Asian Demand Supports Structural Buying
Asian-listed funds attracted approximately $2 billion in August. This marks the strongest month for regional inflows since February. China accounted for the majority of these inflows. The World Gold Council links the overall surge to currency intervention concerns and fiscal sustainability issues. Geopolitical tensions continue to support safe-haven demand.
Technical Levels Define Next Move
Gold has broken above a descending trendline. This move ended months of lower highs. The rally toward 4,600 indicated buyers were rebuilding control. The current pullback appears to be a reset rather than a break in recovery. The key level to watch is 4,450.
A move back above 4,450 would signal returning momentum. Clearing 4,600 would shift attention toward 4,900 and then 5,420. If the pullback deepens, 4,300 becomes the structural floor. Losing support below 4,270 would change the broader market structure. In that scenario, 4,000 becomes the next critical support level. Source: Gold (Google News).
