On Tuesday, influenced by multiple factors including Fed rate hike expectations, rising oil prices and central bank gold purchases, gold faced resistance during its rebound. Bulls and bears engaged in fierce intraday battles, but mounting inflation concerns weighed on gold and prices eventually turned lower. Spot gold fell to $4345.82 per ounce during US trading hours and closed at $4355.30 per ounce, posting a 1.1% loss. On Wednesday, spot gold rebounded from a one-week low of $4341.23 per ounce hit in the ASIan session. A stronger Japanese yen pushed the US dollar slightly lower, offering some support for gold and halting its three-day losing streak temporarily. During European trading, spot gold briefly climbed above $4412.00 per ounce. At press time, it traded near $4406.50 per ounce. Market data shows the US Dollar Index remained weak overall, underpinning gold, and short covering fuelled a rapid price recovery.
Current central bank gold buying and geopolitical risks provide downside buffers for gold. Data shows the People’s Bank of China added 20.2 metric tons of gold reserves in August 2026, marking the largest monthly purchase since October 2023 and extending its consecutive gold buying streak to 22 months. Central banks across the globe keep diveRSIfying foreign exchange reserves. Physical buying caps the scope of deep gold declines and prevents sustained sell-offs. Meanwhile, ongoing US-Iran tensions lift geopolitical risk premiums, pushing crude oil to three-month highs and stoking inflation worries. This reinforces market expectations for Fed monetary tightening, which in turn restricts gold gains. Investors are awaiting US inflation data due this week, namely Thursday’s PPI and Friday’s CPI releases, for clues on the Fed’s policy path.
On the other hand, markets widely expect the European Central Bank to deliver a 25-bASIs-point rate hike on Thursday. In addition, markets have fully priced in a rate hike from the Bank of Japan at its meeting next week. The Reserve Bank of Australia is also considering a possible rate hike later this month. The Fed’s upcoming decision stands at a delicate juncture. The strong August non-farm payrolls report released last week lifted the probability of a September rate hike to 60%. Yet history shows the Fed tends to avoid ambiguous actions. Since 2015, ahead of Fed meetings, market pricing for rate hikes has not stayed within the 38%–69% range for long. Once odds exceed 69%, the Fed typically tightens policy.
Short-term gold market outlook: Spot gold faces resistance at $4600.00 per ounce, with downside support at $4325.00 per ounce.
Spot Gold Daily Chart
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