Spot gold surged to an intraday high of $4,510.90 per ounce on Thursday, marking its strongest level since August 28, before settling at $4,473.53 per ounce with a daily gain approaching 2%. Futures contracts climbed even more sharply, closing 2.8% higher at $4,539.9. This powerful rally was driven by a convergence of factors: Federal Reserve Governor Waller's unexpected dovish remarks, simultaneous weakness in the US dollar and Treasury yields, and escalating geopolitical tensions in the Middle East. With rate expectations loosening amid broader macroeconomic uncertainty, gold has once again demonstrated its compelling appeal.

Waller's Surprise Dovish Shift Dismantles Market Rate Hike Bets

Ahead of the Fed's September policy meeting, the market had been positioned for a hawkish outcome. Fed Chair Warsh's hawkish speech at the Jackson Hole symposium had pushed the probability of a September rate hike above 65%. However, Governor Waller, often labeled a "swing hawk," delivered unexpectedly strong dovish signals during a September 3 event. Waller explicitly stated that if upcoming August inflation data confirms easing price pressures, he would lean toward supporting a pause in rate hikes at the September 15-16 policy meeting. He even borrowed John Lennon's famous lyric, urging the Fed to "give inflation a chance" to cool, advocating against premature rate increases to allow the disinflation process to fully develop. Nevertheless, Waller did not completely close the door on tightening—he emphasized that if inflation data comes in hot, he would consider supporting a hike, noting that even a modest acceleration in prices could shift him toward favoring more restrictive policy.

The remarks triggered an immediate chain reaction across financial markets. According to the CME FedWatch tool, market pricing for a September rate hike plunged from approximately 62% before Waller's speech to around 50%. The 10-year Treasury yield fell 3.8 basis points to 4.756%, marking its largest single-day decline since August 25, while the 2-year yield dropped 5.6 basis points to 4.33%. The US dollar index weakened in tandem, touching 98.83—a nearly two-week low. Bob Haberkorn, senior market strategist at StoneX, commented: "A growing number of traders are embracing the view that the Fed might hike once, but there may not be much room for further adjustments after that." Analysts at Evercore ISI also noted in a report that Waller's comments echo earlier remarks from New York Fed President Williams, posing a substantial challenge to the prevailing view that the Fed would tighten in the near term.

The Perfect Storm: Multiple Positive Catalysts Propel Gold Higher

The dramatic impact of Waller's dovish remarks on gold prices stems from the highly sensitive negative correlation between gold and Fed rate expectations. When rate hike expectations rise, the opportunity cost of holding non-yielding gold increases, driving capital toward higher-yielding dollar assets. Conversely, when those expectations cool, valuation pressure on gold eases. On September 3, multiple favorable factors created a rare confluence. Falling Treasury yields directly reduced gold's opportunity cost; a softer dollar made dollar-denominated gold cheaper for overseas buyers; and technical oversold conditions—following gold's drop to its lowest level since August 7 the previous day—provided additional momentum for bulls.

Spot gold peaked at $4,510.90 per ounce intraday before closing at $4,473.53, a gain of approximately 1.96%. On the technical front, gold launched a one-way rally from its $4,283 phase low, breaking through several key resistance levels in succession. The Relative Strength Index (RSI) has turned modestly bullish, suggesting prices could continue climbing, with the next resistance level sitting at the 200-day simple moving average around $4,533.

Geopolitics as a Double-Edged Sword: The Delicate Balance Between Safe Haven and Inflation

Just two days before Waller's speech, tensions in the Middle East escalated sharply. The US launched large-scale airstrikes on Tuesday against Iranian Revolutionary Guard Corps targets along the Strait of Hormuz, prompting Iran to retaliate against American military bases in Kuwait, Iraq, Jordan, Qatar, and Bahrain. Iranian officials reported that US airstrikes hit a residential building hosting a wedding, killing five people and injuring nearly 70. The conflict pushed international oil prices higher for a fourth consecutive session, with Brent crude futures briefly touching $97.59 per barrel—the highest level since July 24. The surge in oil prices reignited inflation concerns, precisely the Fed's most troublesome headache.

In fact, over the preceding trading sessions, it was the combination of Middle East conflict-driven inflation worries and Fed Chair Warsh's hawkish remarks that had driven Treasury yields sharply higher, pushing gold down to a two-week low below $4,300. This creates a complex situation for gold: on one hand, escalating Middle East conflict should normally trigger gold's safe-haven appeal; on the other hand, higher oil prices raising inflation expectations actually reinforce the case for Fed rate hikes. When geopolitical risk primarily transmits through inflation and rate channels, gold's safe-haven characteristics often temporarily fail to assert themselves.

Waller's dovish remarks proved so effective at boosting gold precisely because they broke the negative transmission chain of "higher oil prices → rising inflation → higher rate hike expectations → gold under pressure." Additionally, no confirmed exchanges of fire have occurred since Wednesday midday, indicating initial signs of de-escalation in the latest round of tensions. Senior aides to President Trump are pushing to avoid further escalation of the Iran conflict before the November midterm elections to limit damage to Republican prospects. Sources indicate the White House will consider intensifying military action only after the November 3 vote.

Key Variables Ahead: Nonfarm Payrolls and CPI Data Will Be Decisive

Despite Waller's dovish stance providing strong short-term support for gold prices, the market has not fully discounted the possibility of a Fed rate hike. Waller himself made clear that his decision would "depend heavily on" the August inflation data due next week. Investors are now closely monitoring two critical data points: first, the August US nonfarm payrolls report due September 4, where economists expect job growth of 56,000—reversing July's decline of 23,000—with the unemployment rate expected to hold at 4.1%; second, the August CPI and PPI inflation reports due September 11. These data points will directly determine market pricing for a rate move at the September FOMC meeting. Weak data could further cool rate hike expectations, providing more room for gold to rebound, while strong data would reinforce tightening expectations and pressure gold prices.

The August ISM services PMI revealed that the prices paid index jumped to 72.6 from July's 70.3, the highest reading since August 2022. This elevated reading indicates inflation pressures remain stubborn, meaning the bar for the Fed to hold rates steady at the September meeting is not low.

Long-Term Perspective: Gold's Bull Market Thesis Remains Intact

While short-term price action remains hostage to fluctuating Fed policy expectations, the fundamental logic supporting gold's long-term bull market remains solid. Looking at global central bank buying trends, central banks continue to steadily increase their gold reserves. A World Gold Council survey shows 45% of central banks plan to increase their gold reserves over the next 12 months—a record high. Goldman Sachs Research expects global central banks to purchase an average of 50 tons of gold per month in 2026, significantly above the pre-2022 average of 17 tons per month. The People's Bank of China has now increased its gold holdings for 21 consecutive months.

From the perspective of the dollar-based credit system, high global debt, large deficits, and rising interest costs continue to erode the long-term real returns of sovereign credit assets. Geopolitical fragmentation, financial sanctions, and reserve diversification are increasingly elevating gold's strategic allocation value. RBC Capital Markets projects gold prices will reach $5,000 per ounce by 2026, driven by geopolitical instability, global de-dollarization, and concerns over dollar depreciation.

However, the door to a September rate hike is not fully closed. The upcoming nonfarm payrolls and CPI data will be the key variables determining gold's short-term direction. Every swing in rate hike expectations could trigger sharp volatility in gold prices. The probability of at least one 25-basis-point hike this year remains above 80%, which could constrain gold's upside potential.

As of 07:48 Beijing time, spot gold was trading at $4,475.15 per ounce.