Gold Bears Tighten Grip as Fed Rate Hike Bets Rise

Gold remained under pressure on Thursday, trading near $4,258.31625, down nearly 0.65% on the day, after earlier touching a one-week low. Rising U.S. Treasury yields and a stronger dollar jointly weighed on gold prices, with escalating market bets on Fed rate hikes serving as the core driver.

**Hawkish Expectations Pressure Yield-Free Assets**

According to CME FedWatch tool data, traders have largely ruled out the possibility of Fed rate cuts this year, with bets on further hikes gaining momentum. Treasury yields held at elevated levels and the dollar index remained firm, diverting funds from yield-free gold into dollar-denominated assets. Market reports indicated some investors are favoring yield-bearing assets, keeping gold buying interest subdued.

**Geopolitical Risks Provide Downside Buffer**

Uncertainty persists in the Middle East, with the Strait of Hormuz handling about 20% of global seaborne oil shipments, as supply concerns pushed energy prices higher, in turn affecting inflation expectations. However, geopolitical risk premiums offered some support to gold, limiting downside. On the technical front, gold's daily chart has broken below short-term moving average support, with MACD turning below the zero line, signaling strengthening short-term bearish momentum. Yet, safe-haven buying remains beneath, and high-volatility consolidation may persist in the near term.

**Focus on Inflation Data and Official Remarks Ahead**

Upcoming U.S. inflation data and Fed officials' speeches will be key variables. If inflation rebounds, the market may further reinforce high-rate expectations, continuing to weigh on gold's performance. According to Bloomberg economists, fundamental economic conditions do not justify a rate hike, but policy guidance has cornered the Fed into a position where it must act, with this week's hike potentially being the only one this year. Investors should be wary of the knock-on effects of tightening financial conditions on risk assets.