Gold dropped to $4,411.50 per troy ounce on Tuesday as traders raised bets on a Federal Reserve rate hike this month. The CME FedWatch tool now shows a 66.4% chance of a hike, up from 39.6% a week earlier, after Fed Chair Kevin Warsh signaled more work remains on price control.
Gold fell to $4,411.50 per troy ounce, down 1.56% as of 8:54 a.m. ET Tuesday. The drop came after December futures had opened at $4,498.70, up 0.4% from Monday's close, before spot prices slid to $4,432.20 by 7:56 a.m. ET.
Rate-hike odds jump
Stubborn inflation, kept elevated by the ongoing conflict in Iran, is weighing on the metal. Renewed attacks in the Middle East and recent comments from Fed Chair Kevin Warsh that the Fed still has work to do on price control are raising rate-hike expectations ahead of this month's Fed meeting.
According to the CME Group's FedWatch tool, there is now a 66.4% chance the Fed raises rates by 25 basis points this month, versus a 33.6% chance of no change. Just one week ago, economists put the odds at 60.4% for no change and only 39.6% for a hike. Higher rates are a natural headwind for gold since the metal pays no interest.
Weakness spreads beyond the US
The pullback is echoing outside American markets. Spot gold is trading between $4,428 and $4,456 per ounce. In India, benchmark 24-karat gold has mirrored the trend, holding weak around ₹15,676 per gram in major cities. Prediction markets currently assign low odds to gold reaching $15,000 by December 2026.
Price and speculation risk remain
Gold is still up 9.7% over the past month and 31.1% over the past year, even after slipping 2.8% over the past week. But near these levels, buying carries risk. According to Yahoo Finance: "Buying high to hope for short-term higher is a tough strategy", said Darrell Fletcher, managing director of commodities at Bannockburn Capital Markets.
Thomas Winmill, portfolio manager at Midas Funds, treats positions in bullion, coins, and ETFs as speculative, since commodity prices depend on macroeconomic, political, industrial, and financial factors that are unpredictable and sometimes unknowable.
Sources: Yahoo Finance, Crypto Briefing
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