Gold prices rebound! Falling below 2-month low and then recovering, the direction of Fed interest rates becomes the focus

Gold prices rose slightly on Thursday (8th). (AFP)

[Financial Channel/Comprehensive Report] Gold prices rose slightly on Thursday (8th) after falling to a 2-month low in the previous trading day. Investors are weighing uncertainty over the direction of U.S. Federal Reserve (Fed) interest rates and growing concerns about the high level of U.S. debt.

Spot gold rose 0.4% to $4,126.78 an ounce. Gold prices fell to their lowest level since August 5 on Wednesday (6th) as the dollar strengthened and U.S. Treasury yields climbed.

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U.S. gold futures for December delivery closed up 0.4% at $4,157 an ounce.

The dollar and U.S. 10-year Treasury bond yields remained at high levels for the second consecutive trading day.

Nitesh Shah, commodity strategist at WisdomTree, said: "The high yields seem to highlight the market's growing concerns about the large scale of debt. If debt continues to increase, then gold, as the opposite of legal currency and government assets, is likely to be favored."

The impact of the Federal Reserve’s interest rate policy on gold prices

Minutes from the Federal Reserve meeting showed that policymakers were divided on the reasons for raising interest rates last month. Some participants believe that raising interest rates is necessary to avoid the expansion of the impact of energy prices and other price shocks; however, core officials with a more hawkish stance believe that raising interest rates is a necessary measure to prevent the emergence of demand-driven inflation.

Shah added: "The minutes highlight that the Fed's interest rate policy does not really have a predetermined path, which also makes the gold market slightly more volatile."

U.S. Federal Reserve Governor Christopher Waller said on Thursday that further interest rate hikes may be needed in the future, but he also added that the pace of interest rate hikes is "flexible" and did not rule out the possibility of the Fed pausing to raise interest rates in October.

According to the CME Group's FedWatch tool, traders believe there is a 17% chance of the Fed raising interest rates in October, but the market has priced in an 81% chance of the Fed raising interest rates in December.

In terms of other precious metals, spot silver fell 1.9% to US$58.98 per ounce; platinum rose 0.1% to US$1,637.41 per ounce; palladium rose 0.1% to US$1,126 per ounce.

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