Gold Nears $4,701 Despite Rising Rate Hike Bets

SadaNews - Gold has stabilized after its decline, following the rise in inflation in the United States which has increased the likelihood of the Federal Reserve raising interest rates this year.

The precious metal was trading around $4,701 an ounce, after a 0.4% drop on Tuesday. The Consumer Price Index (CPI) in the United States jumped in April at the fastest pace since 2023. When adjusted for inflation, wages fell for the first time in 3 years.

One-night index swaps are now pricing in a probability of over 40% for a rate hike by the Federal Reserve by the end of the year, up from nearly zero at the end of last month.

U.S. yields have risen as investors seek to compensate for holding bonds, amid persistent inflation due to high energy prices. Typically, high interest rates are negative for gold because it does not yield any interest. However, the metal has avoided significant losses despite rising rate hike expectations.

Gold Holds Firm Despite Rising Rates

Yuqing Tang, Head of Interest Rate and Currency Strategy in Asia for JPMorgan Private Bank, stated that this "asymmetrical" relationship is not new.

She added: "We’ve seen the same pattern, very clearly, starting from 2022. Gold prices remained resilient when rates rose. They tended to rise when rates fell."

She noted that the main driver is demand, especially strong purchases from central banks. She added: "This, in turn, supports our view that gold can achieve uncorrelated return patterns."

This week, President Donald Trump unveiled new proposals to reduce prices, targeting beef and gasoline amid a surge in consumer prices that could threaten his party's control of Congress.

Silver Price

Silver prices were also recorded near $86.