Oil prices break 100, Federal Reserve rate hike probability at 86.5%, Bank of Japan expected to raise rates on Friday, gold prices under triple pressure

Huitong Network, September 14—— Oil prices surged by about 3%, intensifying inflation concerns. CME shows the probability of the Federal Reserve raising rates this week has increased from 67% to 86.5%. The Bank of Japan is also widely expected to hike rates on Friday. Tighter policies by major central banks are creating a yield headwind for non-yielding assets like gold.

During Asian trading hours on Monday (September 14), spot gold fluctuated lower, currently down 0.6% to around $4,320 per ounce, as surging oil prices heightened inflation concerns and boosted expectations for a Fed rate hike at this week's policy meeting.

The CME FedWatch tool shows the market has now priced in an 86.5% probability of a rate hike at the Federal Reserve’s Thursday meeting (East Eighth Zone), higher than the roughly 67% probability before last week's inflation data release; the Bank of Japan is also widely expected to raise rates on Friday. The prospect of further tightening by major central banks presents a clear yield headwind for yield-less gold.

Dual Headwinds from Surging Oil Prices and Rate Hike Expectations

A chief market analyst noted: "Gold has not found any favorable conditions. Rising energy prices, along with increasing rate hike expectations ahead of the Federal Reserve and Bank of Japan meetings, present a clear yield headwind for gold."

He added: "Meanwhile, as long as there remains uncertainty in geopolitics and rate policies, gold’s price declines should still attract buyers as a hedge against uncertainty."

The reinforcement of Fed hike expectations came from last week—US consumer prices accelerated in August, while a key core inflation indicator recorded the largest increase in four months.

Traders are now pricing an 86.5% probability of a Fed rate hike at Thursday's meeting (East Eighth Zone), up from about 67% prior to last week's inflation data release.

The Bank of Japan is also widely expected to hike rates on Friday, as sustained inflation and resilient economic growth have increased the likelihood of further rate hikes by major central banks—especially against a backdrop of rising energy prices and virtually no signs of easing tensions in the Middle East.

Although gold is typically seen as an inflation hedge, higher interest rates tend to reduce the appeal of non-yielding gold.

Middle East Situation: Houthi Attacks and Iranian Assaults on Ships Intensify Supply Worries

Oil prices surged nearly 3% on Monday, following new Houthi attacks on Saudi Arabia and Iranian assaults on ships in the Persian Gulf, which further heightened supply concerns after a key Saudi oil pipeline shutdown.

Middle East diplomacy appears to be at a standstill—a scheduled meeting between Iran and other Gulf states has been postponed. The Houthis recently launched missile and drone attacks against southern Saudi Arabia, targeting energy facilities and military bases, resulting in temporary disruption of some oil-related infrastructure and further highlighting the vulnerability of the Red Sea and East-West oil pipelines.

At the same time, there have been continued reports of attacks on vessels near the Persian Gulf and the Strait of Hormuz, amplifying security risks to global crude transportation routes.

After the previous attack, a key Saudi oil pipeline was shut down, forcing some exports to reroute and testing inventory buffer capacity.

On a diplomatic level, a meeting initially planned between Iran and other Gulf nations to discuss shipping security was postponed, suggesting that regional tensions are unlikely to ease soon.

The combination of these events has directly increased market concerns over supply disruptions. During Asian hours on Monday, crude oil futures jumped by over 3% and may further impact global inflation expectations and Federal Reserve policy discussions through higher energy costs.

Traders need to closely monitor the frequency of subsequent attacks and diplomatic developments to assess the transmission of oil price risks to forex and bond markets.

Institutional Views

Goldman Sachs forecasts a spot gold target price of $4,900/oz by the end of 2026 and believes there is net upside risk.

Analysts point out that strong, sustained gold purchases by central banks remain a core support, with monthly purchases expected to average around 50 tons in 2026, well above pre-2022 levels. If ETF inflows resume and derivative hedging demand increases, gold prices could significantly exceed targets. Conversely, if Fed hike expectations intensify, there could be a sharp correction.

Goldman Sachs sees the current adjustment as a mid-cycle consolidation in a bull market, with strong support around $4,000 and advises buying on dips, with no change in the long-term structural logic.

HSBC projects an average gold price of $4,560/oz in 2026, with a year-end target of about $4,750.

The bank noted that central bank gold buying remains an important support, but investor demand and ETF inflows may fluctuate depending on the interest rate environment.

HSBC's outlook for 2027 is higher (around $4,925/oz), believing that as the Federal Reserve eventually shifts to easing and geopolitical uncertainty continues, gold retains medium- to long-term upside potential.


(Spot gold daily chart, source: Easy Huitong)

15:16 (East Eighth Zone), spot gold at $4,322.51/oz.