Gold Dips Below $4,300 as Rate Hike Bets Solidify Ahead of Fed Decision

Gold extended its losing streak on Monday, sliding below the $4,300 level as mounting expectations of a US Federal Reserve interest rate hike this week shifted investor demand away from the non-yielding metal. Bullion is now down more than 3% in September after trading above $4,700 an ounce in late August.

Spot gold was last quoted at $4,284.52 an ounce, down 0.9% for the session, according to multiple reports. US gold futures fell 1.4% to $4,348.50. The metal had already posted a third consecutive weekly decline ahead of Monday’s drop. By Tuesday Asian trading, gold steadied around $4,290 an ounce, with some analysts warning a break below key support at $4,250 could open the door to a move towards $4,000.

Rate hike bets have surged over the past week. Traders are now pricing in between an 87% and 92% probability of the Fed raising rates at its two-day meeting beginning Tuesday, up sharply from about 67% before last week’s inflation data, according to the CME FedWatch Tool. The Bank of Japan is also expected to raise rates on Friday, adding to the global tightening outlook.

The shift followed hotter-than-expected US consumer price data for August, which showed a key measure of underlying inflation recording its biggest increase in four months. That reinforced expectations that the Fed will deliver its first rate increase since 2023.

Rising energy costs are compounding the inflation picture. Oil prices jumped about 4% on Monday after fresh Houthi strikes on Saudi Arabia and Iranian attacks on Gulf shipping compounded supply concerns from the closure of a key Saudi oil pipeline. Brent crude traded above $108 a barrel, while West Texas Intermediate rose above $103.

“Markets are now fully pricing in a Fed rate hike following last week’s CPI data,” UBS analyst Giovanni Staunovo said, as reported by Ndtvprofit. He added that higher oil prices could intensify inflation concerns.

The yield on the 10-year US Treasury rose to 5.04% on Tuesday, the highest level in almost two decades, adding to the pressure on gold. Higher borrowing costs are typically negative for gold, which does not pay interest. The dollar also climbed to its highest in more than a week, further pressuring bullion for holders of other currencies.

“With markets already pricing a high chance of a Fed hike this week, the main uncertainty is less about the hike itself, and more about what comes after,” Christopher Wong, a strategist at ocbc, told Businesstimes. “If the Fed keeps the door open to further tightening, gold may be more vulnerable,” he added, noting the risk of a fall towards $4,000 if $4,250 support breaks.

Goldman Sachs and hSbc also expect a 25-basis-point increase at this week’s meeting, according to Ndtvprofit.

Other precious metals also weakened. Spot silver fell about 1.3% to $62.96-$63.22 an ounce across reports. Platinum dropped 1.4% to $1,770.82 and palladium declined 1.4% to $1,280.97.

In the Indian domestic market, gold October 5 futures on the Multi Commodity Exchange fell 1.26% to ₹1,50,856 per 10 grams, while silver December 4 futures dropped 1.90% to ₹2,30,513 per kilogram. Jateen Trivedi, vp Research Analyst at lKp Securities, said the upcoming Fed decision could keep gold under pressure, with a range of ₹1,49,000-₹1,54,000 expected.

The broader trend highlights shifting safe-haven demand. While gold is traditionally seen as an inflation hedge, higher interest rates erode its appeal as a portfolio diversifier. Many investors are betting that bullion will regain momentum once it rediscovers its traditional value as a hedge, but near-term sentiment remains fragile as markets await the Fed’s decision and forward guidance.