Gold Jumps 2% as Fed’s Waller Throws September Rate Hike Into Doubt

Gold reversed sharply higher after Federal Reserve Governor Christopher Waller signaled that continued progress on inflation could justify keeping rates unchanged this month. The move shows how quickly the market’s interest-rate narrative has changed since last week’s hawkish shock.

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Gold has staged a sharp recovery after one of the most difficult stretches of its August rally, with a shift in Federal Reserve expectations helping bullion regain ground lost during the recent bond-market selloff.

On Thursday, spot gold rose 2.3% to about $4,488.54 per troy ounce in late U.S. trading, according to Reuters. U.S. gold futures settled 2.8% higher at $4,539.90.

The move is also clear in GoldRates’ own market data. The 24K gold price rose from $141.04 per gram on September 2 to $143.90 on September 3, an increase of just over 2%. At 6:00 a.m. UTC on September 4, GoldRates listed gold at $4,472.18 per troy ounce and $143.78 per gram for 24K gold, showing that most of Thursday’s rebound was still intact even as prices eased slightly in early Friday trading.

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What changed for gold?

The immediate catalyst was not a new geopolitical shock or a sudden increase in physical gold demand. It came from Washington.

Federal Reserve Governor Christopher Waller said on Thursday that recent inflation data are finally showing signs of disinflation and that, if the improvement continues in the data due before the next policy meeting, he would be inclined to support leaving the federal funds rate unchanged.

In his September 3 remarks published by the Federal Reserve, Waller said the labor market remains stable, and inflation is making slow progress toward the Fed’s 2% goal. The federal funds target range is currently 3.50% to 3.75%.

That was enough to change the market’s interpretation of the September 15-16 Federal Open Market Committee meeting. Reuters reported on Friday that traders were assigning roughly a 50% probability to a rate increase this month. In broader markets, expectations had fallen from about 63% before Waller’s comments.

The repricing pushed Treasury yields lower and weakened the U.S. dollar. Both developments tend to be supportive for gold because bullion does not pay interest and is internationally priced in dollars.

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A sharp reversal from the Warsh selloff

The speed of the change is particularly important because the gold market was dealing with almost the opposite story only days ago.

Federal Reserve Chair Kevin Warsh’s Jackson Hole remarks on August 28 pushed markets toward the view that inflation remained sufficiently persistent for the Fed to consider further tightening. Gold sold off sharply as rate expectations rose, bond yields climbed, and the dollar strengthened.

GoldRates recorded 24K gold at $147.78 per gram on August 27 before the price fell to $143.23 on August 28. The move was examined in our earlier report, Gold Tumbles After Warsh Signals the Fed May Have More Work to Do.

The latest rebound therefore does more than recover part of that decline. It shows how sensitive gold has become to small changes in the expected path of U.S. monetary policy.

Last week, the market heard that the Fed might need to do more. This week, Waller has argued that policymakers may be able to wait if disinflation continues. That change has been enough to reverse part of the pressure that had been coming through Treasury yields and the dollar.

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Waller has not ruled out a September rate hike

The important qualification is that Waller did not say the Fed is finished raising rates.

His position is explicitly dependent on incoming data. He said that if August inflation comes in hot and shows that progress toward 2% has reversed, he would consider supporting a rate increase at the September meeting.

That distinction matters. Inflation remains well above the Fed’s target. Waller noted that headline PCE prices were 3.7% higher than a year earlier in July, while core PCE inflation was 3.3%. He also said that energy prices, technology-related price pressures and the possibility of additional tariffs remain upside risks.

At the same time, he highlighted a more encouraging short-term trend. Three-month core inflation had fallen to 3.05% through July from 4.76% in February. In Waller’s view, that decline is meaningful enough to justify giving the disinflation process more time if August data confirm it.

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Why falling yields matter so much for gold

Gold’s reaction illustrates the unusually strong influence that interest-rate expectations are having on the market.

When investors expect U.S. rates to remain higher or rise further, yields on government bonds can become more attractive relative to an asset such as gold that produces no interest income. Higher yields can also support the dollar, increasing the local-currency cost of gold for buyers outside the United States.

The reverse can happen when rate expectations ease. Lower yields reduce the opportunity cost of holding bullion, while a weaker dollar can improve affordability for buyers using other currencies.

This relationship has been visible repeatedly during the recent rally and pullback. GoldRates previously examined the same mechanism when falling Treasury yields helped gold break above $4,500 and again when rising yields began to overpower gold’s safe-haven support.

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Oil is still high, but the market is reading it differently

The rebound is even more notable because the geopolitical and energy backdrop has not become substantially calmer.

Brent crude was trading near $96 a barrel on Friday and was heading for a steep weekly gain as renewed U.S.-Iran clashes kept concerns about Middle Eastern supply disruptions alive, Reuters reported.

Earlier in the week, rising oil prices were working against gold because investors viewed the energy shock primarily through the inflation channel. More expensive energy could keep inflation elevated and make the Fed more willing to tighten policy.

Waller’s comments have complicated that interpretation. He said he does not currently see elevated energy prices and tariffs as a significant source of ongoing inflation pressure, while acknowledging that renewed energy increases remain a risk.

The conflict itself has not disappeared. What has changed is the market’s assessment of how the Federal Reserve might respond to the inflation it creates.

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The next test is U.S. employment and inflation

Gold’s rebound does not settle the direction of the market from here.

Investors are now focused on the August U.S. employment report. Economists surveyed by Reuters expect nonfarm payrolls to rise by about 56,000 after a 23,000 decline in July, with unemployment expected to remain at 4.1%. Reuters’ payroll preview notes that the labor market has slowed but remains constrained by unusually weak labor-force growth.

Employment matters, but Waller made clear that the August inflation reading is likely to carry even greater weight in his own September decision. That means the market could continue to reprice the probability of a rate increase as each major U.S. data release arrives.

For gold, the result is a market that remains unusually sensitive to rates, yields, and the dollar. Thursday’s 2% move was not simply a technical rebound after a selloff. It reflected a meaningful change in expectations about what the Federal Reserve may do next.

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What this means for gold buyers around the world

The international gold price is quoted in U.S. dollars, but the effect of this volatility differs across countries because exchange rates also move when Fed expectations change.

A weaker dollar can amplify the benefit of a gold rally for some markets while reducing the local-currency increase in others. GoldRates provides live gold prices across major currencies including USD, INR, EUR, GBP, CAD, AUD, JPY and HKD, allowing readers to compare how the same global move is being reflected locally.

Readers looking beyond the latest session can also use the GoldRates historical price data to compare the rebound with the sharp moves seen during the final week of August. The site’s methodology explains how GoldRates separates recent price momentum from the broader market conditions influencing gold.

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The bigger picture

Gold has spent the past week moving between two competing narratives.

Persistent inflation, high oil prices and the possibility of another Fed rate increase have supported the dollar and bond yields. At the same time, geopolitical uncertainty, continued official-sector demand and questions about the longer-term U.S. fiscal and monetary outlook remain part of the broader case for holding gold.

Thursday’s rally shows which variable is currently dominating the short-term market: expectations for U.S. interest rates.

Waller has not removed the possibility of a September hike. He has made it conditional again. For a gold market that had begun to treat another increase as increasingly likely, that distinction was enough to produce a powerful reversal.

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