Gold Resilient Amid Rate Pressures
Gold Holds Near Record Highs Despite Federal Reserve Rate-Hike Pressures
Anonymous
Key Points
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Gold had gained 95.6% over the preceding year as of January 29, underscoring the scale of its longer-term rally despite the September 21 pullback.
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U.S. President Donald Trump said he would “probably” be willing to meet Iranian President Masoud Pezeshkian on the sidelines of the United Nations General Assembly, while Iran’s security chief said Tehran had conveyed conditions to Washington through international mediators.
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Minneapolis Fed President Neel Kashkari said inflation remained broad-based, remarking that “the inflation that the American people are feeling every day is much beyond just oil prices — it’s in all aspects of the economy.”
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The head of U.S. Central Command said crude oil and liquefied natural gas flows through the Strait of Hormuz had reached their highest level in six months during the previous two weeks, offering evidence of improving energy transportation conditions.
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Gold-backed exchange-traded funds recorded inflows for eight consecutive days despite the recent price weakness, according to Century Financial’s Vijay Valecha, suggesting sustained investor conviction beyond the UAE market’s general inflow trend.
Gold edged lower on September 21 to roughly $4,350–$4,360 an ounce but remained near record highs, caught between a firmer U.S. dollar and safe-haven demand from Middle East tensions. FX Empire noted the decline came as the Federal Reserve raised rates by 25 basis points to 3.75%–4.00%, with most policymakers projecting another hike. Despite near-term pressure, the metal has surged 95.6% over the preceding year, and major banks including Goldman Sachs, UBS, and UOB remain broadly bullish over the longer term.
Gold-backed exchange-traded funds recorded inflows for eight consecutive days despite the recent weakness, signaling sustained investor conviction. Mining.com.au reported that rising borrowing costs and Treasury yields have pressured the non-yielding metal, while lower oil prices and improved energy flows in the Strait of Hormuz have limited the decline. Ongoing Middle East tensions involving Iran-backed Houthis continue to support safe-haven demand.
Why Higher Rates Pressure Gold Right Now
A stronger U.S. dollar and rising Treasury yields have created short-term headwinds for gold. VT Markets explained that expectations of further Federal Reserve rate hikes lifted borrowing costs, making non-yielding bullion less attractive to traders. Minneapolis Fed President Neel Kashkari reinforced the Fed's hawkish stance, saying: 'The inflation that the American people are feeling every day is much beyond just oil prices — it's in all aspects of the economy.' Higher rates typically reduce gold's appeal because investors can earn returns by holding interest-bearing assets instead.
TD Securities reported that commodity trading advisers have unwound recent gold purchases following the Fed's decision. However, discretionary investors remain supportive and view modest weakness below $4,360 as a buying opportunity. This split reflects a market torn between algorithmic profit-taking and deeper conviction in gold's longer-term appeal.
Energy Flows Ease Despite Middle East Tensions
Lower oil prices have capped the rise in Treasury yields, limiting gold's decline. The head of U.S. Central Command reported that crude oil and liquefied natural gas flows through the Strait of Hormuz reached their highest level in six months during the preceding two weeks. This easing of energy transit blockage has reduced oil-driven inflation, offering relief to consumers and dampening upward pressure on yields.
Yet Middle East tensions remain a wild card. Mining.com.au noted that ongoing fighting involving Iran-backed Houthis continues to support safe-haven demand for gold. Meanwhile, Trump signaled openness to direct talks with Iran's leader, and Iran's security chief confirmed Tehran had conveyed diplomatic conditions through international mediators. Any escalation could reverse the recent energy flow improvement and reignite safe-haven buying.
Central Banks and Structural Demand Keep Bullion Afloat
Despite near-term rate-hike pressure, Goldman Sachs maintains a $5,400 target for end-of-2027, citing central-bank buying, dollar diversification concerns, and fiscal-debt expansion. Century Financial's Vijay Valecha highlighted eight consecutive days of inflows into gold-backed ETFs, showing sustained conviction beyond the UAE market. This physical demand from Asia and institutional buyers has cushioned gold against deeper sell-offs.
UBS and UOB project further gold gains through 2027, betting that structural factors—sovereign debt concerns, central-bank reserve reallocation, and private-sector Asian demand—will outweigh higher yields in the long run. Gold's 95.6% one-year rally reflects this shift: investors are accepting near-record prices because they see deeper macro risks ahead.
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