Key Takeaways: Bearish sentiment on gold has reached its widest margin in months, with the Federal Reserve's hawkish pivot and rising rate hike probabilities overshadowing the upcoming June payrolls report.
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Gold bears dominate as Fed rate hike odds climb to 86%
Bearish sentiment on gold has reached its widest margin in months, with the Federal Reserve's hawkish pivot and rising rate hike probabilities overshadowing the upcoming June payrolls report.
COMEX gold bears outnumbered bulls on both Wall Street and Main Street in the latest Kitco News Weekly Gold Survey, as markets priced in a growing probability of Fed rate hikes.
"The probability of a rate hike by December stands at 86 percent, up from 36 percent for the July meeting," according to the CME Group's FedWatch Tool, which tracks 30-day Fed Funds futures prices.
Nine of 18 Federal Open Market Committee members forecast one or more rate increases by the end of 2026 in the quarterly dot plot released June 17, according to the Summary of Economic Projections. New Fed Chair Kevin Warsh, who took office May 22, abstained from submitting a projection. His voting record leans decisively hawkish, favoring high interest rates to suppress inflation.
The June payrolls report, due next week, represents the next major catalyst for gold. A stronger-than-expected reading could reinforce hawkish Fed expectations and deepen the bearish outlook, while a weaker print may provide temporary relief for the precious metal.
Rate Hike Odds Reshape Gold Outlook
The CME FedWatch Tool now assigns a 70 percent probability of a rate hike by the September FOMC meeting and a 90 percent chance by March 2027. Higher borrowing costs threaten to slow capital-intensive sectors including artificial intelligence data center build-outs, potentially tempering growth expectations across risk assets and pressuring gold as an alternative investment.
The Shiller cyclically adjusted price-to-earnings ratio for the S&P 500 sits 3.5 percent below the dot-com bubble peak, according to Barchart data, showing the extent to which elevated equity valuations depend on continued monetary accommodation. Gold at current levels trades at a premium to its 200-day moving average, though the metal has underperformed silver and copper year-to-date as industrial demand stories have drawn capital away from precious metals.
Payrolls Data in Focus
The June nonfarm payrolls release will provide the next test of labor market tightness. A strong jobs number would give the Fed additional cover to raise rates, while a miss could revive expectations that the central bank will hold steady. Gold prices remain sensitive to shifts in real yield expectations, with the metal's non-yielding status making it particularly vulnerable in a rising rate environment.
This article is for informational purposes only and does not constitute investment advice.
[1] Bears abound on Wall Street and Main Street as markets digest Fed's hawkish bias with June payrolls on deck[2] The Probability of a Federal Reserve Rate Hike Is Soaring, Which Poses a Serious Problem for Wall Street[3] US Dollar Index weakens below 101.50 after US PCE inflation as Fed rate hike odds fade[4] Australian Dollar edges lower to near 0.6900 on Fed hike bets[5] Indian Rupee set to open higher on Monday as US Dollar corrects
