(Kitco News) - Few markets shift sentiment as swiftly—or as dramatically—as gold. Just when you think the trend is set, one headline or data point can send prices into a tailspin or soaring rally.
This week, a single phrase from Federal Reserve Chair Jerome Powell sent the market reeling, pushing prices to a four-week low below $3,300 an ounce. After leaving interest rates unchanged on Wednesday, Powell struck a hawkish tone early in his press conference, stating, “We have made no decisions about September.” Within the hour, gold fell nearly $30, or about 1%.
That brief comment forced markets to quickly recalibrate their expectations for a rate cut. By Thursday, the probability of easing in September had dropped to just 37%.
Fast-forward to Friday, and disappointing employment data completely turned the market around. Within two minutes of the report’s release, gold jumped $30. Spot prices continued climbing and ended the session at $2,361.50 an ounce, up more than 2% on the day.
It’s no surprise gold responded so strongly. The CME FedWatch Tool now shows a 90% chance of a rate cut in September. Markets also see a 50% probability that rates will fall by a full percentage point before year-end.
These aggressive rate-cut expectations are returning even as inflation remains elevated. Analysts say this is ideal for gold, as falling real interest rates reduce the opportunity cost of holding the metal.
Another key driver of gold’s rebound this week is strong investment demand. Investors are once again turning to gold to protect their wealth in an uncertain economic landscape.
According to the World Gold Council’s latest Gold Demand Trends report, investment demand in gold-backed ETFs during the first half of 2025 reached its highest level since early 2020. Still, total ETF holdings remain well below where they were five years ago. That suggests there’s still room for growth, even near record highs.
That’s it for this week. Due to the holiday schedule, there will be no newsletter for the next two weeks.
