State Street Global Advisors stated that the market's implied probability of a 25-basis-point rate hike by the Federal Reserve has risen to approximately 67%. A rise in policy rates will increase the opportunity cost of holding non-interest-bearing assets, which may exert downward pressure on gold prices.
According to Zhitong Finance, State Street Global Advisors noted that in mid-August, the U.S. money market priced in less than a 30% probability of a rate hike in September. However, by August 31, market bets on a 25-basis-point rate increase by the Federal Reserve had risen to approximately 67%. A rise in policy rates will increase the opportunity cost of holding non-interest-bearing assets, potentially exerting downward pressure on gold prices.
State Street Global Advisors' latest Gold Monitor report indicated that spot gold prices surged 9.7% in August, marking the largest single-month gain since January this year. Meanwhile, as the "currency debasement trade" gained momentum, silver and Bitcoin also demonstrated strong upward trends toward the end of summer. However, explicit hawkish remarks by new Federal Reserve Chair Walsh at the Jackson Hole Global Central Bank Symposium caused the rally in gold and other alternative fiat assets to reverse by month-end.
State Street Global Advisors believes that structural drivers supporting gold allocations remain robust in the post-pandemic market landscape. These include record-high government debt levels, inflation persistently above target, rising term premiums on long-term bonds, continued gold accumulation by central banks worldwide, and elevated stock-bond correlation. Although the pace of gold price gains slowed after entering September, the rebound in spot gold prices in August was crucial. It not only successfully consolidated USD 4,000 as a key support level but also laid the foundation for gold prices to challenge the USD 5,000 threshold again within the next six months.