Gold Edges Higher as October Hike Odds Fall to 31%, With HSBC Eyeing a Bottom

The latest inflation data showed U.S. price pressures increased less than expected in August, while the previous month's figures were revised lower. The weaker inflation reading reduced the probability of an October rate hike to 31%, down from 45% before the release and 69% a week earlier. Lower expected interest rates reduce the opportunity cost of holding gold because investors have less incentive to shift toward interest-bearing assets.

However, the bond market continued to create a significant headwind. The U.S. 10-year Treasury yield reached its highest level in more than two decades, increasing the return available from government bonds and therefore raising the opportunity cost of holding non-yielding gold. This helped prevent the weaker inflation data from producing a larger rally in bullion.

The dollar also strengthened, adding another source of pressure. Because gold is priced in dollars, a stronger U.S. currency makes bullion more expensive for buyers using other currencies, potentially reducing international demand.

Oil prices provided an additional complication. Oil rose after China suspended exports of oil products, potentially tightening fuel markets that were already facing global supply shortages. Higher energy prices can feed into inflation, which could slow the decline in interest-rate expectations if investors begin to anticipate renewed inflationary pressure.

HSBC lowered its average gold-price forecasts to $4,490 per ounce for 2026 and $4,825 for 2027, while noting that gold could face additional near-term pressure but may be approaching a bottom. The bank also expects central-bank buying to resume in response to lower prices, particularly if gold approaches or falls below $4,000.