Gold Holds Above 4300 Amid Rate Hikes, Trump’s ‘Big Decision’ Looms, Saudi Crisis Intensifies

Trump’s “major decision” and Saudi Arabia’s desperate plea for help: How will they ignite the market? Gold holds firm against rate hikes as Wall Street goes fully bullish; $7 trillion in capital shifts gears, potentially sparking new volatility in U.S. stocks; Japan’s holiday-era intervention risk rises...

This week, investors absorbed the latest Federal Reserve meeting results with relative calm, but they are preparing for a higher-for-longer interest rate environment and expect market volatility over the coming months.

U.S. stocks ended a mixed week on Friday. Following the Federal Reserve’s first unanimous interest rate hike since 2023, both the S&P 500 and the Dow Jones Industrial Average posted weekly declines. However, the Nasdaq Composite rose for the third time in four weeks, as technology stocks led a rebound following the Fed meeting.

Nevertheless, the market's resilience this week is remarkable, given that the Federal Reserve has signaled that rate hikes may not yet be over.

Federal Reserve Chair Walsh clearly stated that policymakers remain committed to bringing inflation back under control. Despite this hawkish stance, the gold market did not collapse. On Thursday, as oil prices fell, the dollar weakened, and U.S. Treasury yields retreated, traders were able to ease some of the pressure following the Fed’s decision, prompting a rebound in gold. On Friday, the rally extended further as oil prices declined for a third consecutive trading day and yields retreated from their weekly highs, pushing gold prices up to the week’s peak of $4,400.60 per ounce. By Friday’s close, gold held above $4,300, ending three consecutive weeks of declines.

International oil prices fell for three consecutive trading days as market concerns over Middle Eastern supply shifted—Saudi Arabia paused some sales to Europe, but traders and analysts say current buffers remain sufficient.

Here are the key points the market will focus on this week (all times in Beijing Time):

1. How will Trump's "major decision" and Saudi Arabia's desperate plea ignite the market?

Next Tuesday, Trump will hold a meeting with Gulf nations during the UN General Assembly in New York. Additionally, Trump told Axios that he is nearing a “major decision” on whether to escalate strikes against Tehran again.

Meanwhile, the security situation around Saudi Arabia remains volatile. Saudi authorities issued an air defense alert in Riyadh early Saturday, the first such alert in the capital since the most intense period of the U.S.-Iran conflict in March and April.

The Saudi Civil Defense department stated that the danger had been lifted shortly after the two alerts were issued. Similar warnings were also issued overnight for other areas of Saudi Arabia, including the Red Sea cities of Jeddah and Yanbu, as well as the Farasan Islands in the Red Sea.

Pipeline attacks and Iran’s effective blockade of the Strait of Hormuz have caused Saudi Arabia’s oil exports to plummet. New hostilities could now undermine Saudi Arabia’s efforts to attract investment and tourism and diversify its economy.

According to a September 19 report by the Nikkei Asian Review, Saudi Arabia is actively seeking to prevent oil supply disruptions, even making a rare request for support from Israel, with which it does not yet have diplomatic relations.

The report, citing Axios, stated that senior military officials from Saudi Arabia, the United States, Israel, and other countries met in Germany last week to discuss regional developments, including proposals for Israel to provide support to Saudi Arabia. Despite deep-rooted anti-Israel sentiment among the Arab public, including in Saudi Arabia, due to the escalating casualties from Israel’s offensive in the Palestinian Gaza Strip, Saudi Arabia is still seeking to leverage Israel’s military capabilities—a dynamic that reflects Saudi Arabia’s precarious position.

Even before the East-West Oil Pipeline is fully restored, any new attacks on Saudi energy nodes could further reduce Saudi Arabia’s ability to bypass the Strait of Hormuz.

Samer Hasn of XS.com said that the softening of oil prices also reflects growing market optimism that disruptions to Middle Eastern oil exports can be contained. He noted that Saudi Arabia is rerouting crude shipments from its idled Yanbu port, while oil continues to flow through the Strait of Hormuz under U.S. protection, and some Saudi oil flows have already resumed.

Priyanka Sachdeva, Head of Market Insights at Phillip Nova Pte Ltd. in Singapore, said market sentiment is still far from bearish, with traders awaiting evidence of supply recovery. She noted that the recent decline in oil prices appears to reflect a cooling of geopolitical risk premiums rather than a fundamental reversal.

According to data compiled by Bloomberg from ICE Futures Europe and the U.S. CFTC, as of the week ending September 15, fund managers increased their net long positions in WTI and Brent crude oil by 18,254 contracts to 429,413 contracts—the most bullish stance since late May.

“There are many interconnected forces at play,” said David Russell, Global Market Strategist at TradeStation, “but we’ve returned to a point where a clear bullish stance on crude oil no longer offers a favorable risk-reward profile.”

"At this moment, the likelihood of the price going up or down by $10 is the same," he added.

2. Even the Bank of Japan's rate hike couldn't save the yen—will next week's "Silver Week" become a window for intervention?

The Japanese market is entering the "Silver Week" holiday period. Japanese financial markets will be closed from next Monday through Wednesday due to public holidays, with a light economic calendar for the week. The Japanese Ministry of Finance plans to sell three-month treasury bills next Friday.

Japanese media also noted that Japan is seeking to arrange a meeting between Prime Minister Takashi Hayashi and Trump around next Tuesday in New York.

For yen traders, this extended holiday means that if the yen exchange rate once again approaches the Japanese authorities' intervention threshold, lower market liquidity during the holiday period could amplify the impact of official actions.

In April this year, Japanese authorities intervened in the foreign exchange market during a long holiday, marking the first such action since 2024. Investors have since begun speculating whether "Silver Week" could again serve as a window for Japanese intervention.

Despite the Bank of Japan's rate hike this Friday, the yen remained under pressure, and potential intervention has already emerged. Near the close of early U.S. trading on Friday, Japanese media reported that the Bank of Japan had inquired about exchange rate levels with market participants in the foreign exchange market. In response, the yen quickly narrowed its intraday losses, having previously fallen more than 1% against the dollar, the pair briefly retreated to just a 0.3% decline. This has heightened market focus on the possibility of further intervention by Japanese authorities.

With few data releases expected in Japan next week, investors will continue to assess the impact of the Bank of Japan’s decision to raise its policy rate to 1.25%. The 7-2 vote and Governor Kazuo Ueda’s cautious signals regarding further rate hikes have raised doubts about how quickly the central bank can continue tightening policy.

Wall Street also continues to broadly expect a weaker yen. Frantisek Taborsky, strategist at ING, said that the opposition from two dissenting committee members may make it harder to gain support for another rate hike this year. He expects the yen to remain under pressure, with USD/JPY potentially rising to 160 in the coming weeks.

Derek Halpenny of Mitsubishi UFJ Bank also believes the yen has further room to weaken, noting that divergent voting and the Bank of Japan’s characterization of real interest rates as “low” rather than “negative” have dampened expectations of more aggressive policy tightening.

Alex Cohen, foreign exchange strategist at Bank of America, said that despite the Bank of Japan's interest rate hike, the yen has still depreciated significantly, calling today's exchange rate assessment "another warning to the market." He noted that Japan's Ministry of Finance has demonstrated a willingness to intervene in the currency market using substantial foreign exchange reserves, which should again keep the market on alert.

Bloomberg macro strategist Brendan Fagan also said that expectations of intervention will make traders more cautious about continuing to bet on yen depreciation, especially as the USD/JPY exchange rate approaches the key level of 160.

This week, when asked about the risks the U.S. faces from Japan, Bessent directly pointed to the $32 trillion U.S. Treasury market. He said, “A stronger yen means the Japanese government won’t need to sell U.S. assets to fund currency market interventions.”

Federal Reserve:

On Monday at 18:30, Austan Goolsbee, 2027 FOMC voter and President of the Chicago Fed, will speak.

At 22:05 on Tuesday, William, a permanent FOMC voter and President of the New York Fed, delivered a speech at the 2026 U.S. Treasury Market Conference.

At 22:20 on Tuesday, Federal Reserve Vice Chair Jefferson delivered a speech at the 2026 U.S. Treasury Market Conference.

At 01:00 on Wednesday, Barkin, a 2027 FOMC voter and President of the Richmond Fed, will speak.

At 16:10 on Thursday, William Williams, permanent FOMC voter and President of the New York Fed, participated in a fireside chat with former Deputy Governor of the Bank of England, Charlie Bean, at the London Macro Policy Forum.

At 20:00 on Thursday, Barkin, the 2027 FOMC voter and President of the Richmond Fed, will participate in a fireside chat at the Economic Club.

At 20:50 on Thursday, Hamrick, a 2026 FOMC voter and President of the Cleveland Fed, delivered the opening remarks at a conference.

At 22:10 on Thursday, Paulson, a 2026 FOMC voter and President of the Philadelphia Fed, spoke at the FinTech Conference.

At 17:15 on Friday, William Williams, permanent FOMC voter and President of the New York Fed, will speak.

Other central banks:

At 23:20 on Monday, Bank of Canada Governor McCallum delivered a speech.

At 11:10 on Tuesday, Reserve Bank of Australia Governor Bullock delivered a speech.

On Thursday at 16:00, the European Central Bank releases its economic bulletin.

The Federal Reserve raised interest rates this week for the first time since 2023 to curb price pressures. Policymakers expect one more rate hike by 2026, but according to the latest pricing in CME FedWatch tools, the market assigns approximately a 42% probability of two additional rate hikes.

Following the meeting, Kansas City Fed President Schmid stated that he supports the rate hike decision, viewing it as a necessary step to curb high inflation, which is not solely driven by rising oil prices.

Next week, many more Federal Reserve officials are scheduled to speak, potentially providing the market with additional insights.

Gold is currently facing higher Fed rates, Walsh’s hawkish messaging, and 10-year U.S. Treasury yields hovering around 5%. However, the market has not collapsed; instead, it has found buyers and held key levels.

This resilience is important. Investors are beginning to realize that while the Federal Reserve can raise interest rates, it cannot solve America’s fiscal problems. In some ways, higher rates only make these issues more challenging. Higher interest rates may slow inflation, but they also increase the cost of servicing over $40 trillion in government debt.

The government’s annual interest expense alone has already exceeded $1 trillion. The longer interest rates remain high, the more concerning this bill becomes. Analysts say this is why the traditional argument that “higher rates are inherently bearish for gold” is becoming increasingly incomplete.

Gold does not require loose monetary policy to justify its place in a portfolio. Today, investors buy gold primarily to hedge against deteriorating government fiscal conditions, persistent inflation, currency uncertainty, and geopolitical instability.

There is no doubt that more volatility lies ahead. A resurgence in bond yields or oil prices could pressure gold, especially if markets begin pricing in a more aggressive tightening cycle. However, these factors are increasingly becoming short-term considerations within a broader narrative.

The Federal Reserve is fighting inflation, bond markets are struggling with debt, governments continue spending, central banks persist in diversifying their reserves, and geopolitical uncertainty remains. Against this backdrop, it’s no surprise that gold has refused to collapse.

The latest Kitco News weekly gold survey shows that Wall Street is uniformly bullish following gold’s rise after the Federal Reserve’s decision, while mainstream investors have strengthened their bullish majority as gold posted a solid performance this week.

Adrian Day, President of Adrian Day Asset Management, said: "Recent actions by U.S. Treasury Secretary Bentsen indicate that the U.S. Treasury market has broken down and is in distress. The market’s reaction to Bentsen’s interventions and the Federal Reserve’s 25-basis-point rate hike tells us these measures are insufficient."

“A malfunctioning U.S. Treasury market, combined with persistent inflation, is beneficial for gold,” he said.

FxPro Senior Market Analyst Alex Kuptsikevich expects gold prices to rise again next week.

Although gold closed only slightly higher this week, this masks a significant turning point: after the rate hike, gold immediately dropped below $42,500, but that decline has now been fully recovered. From a technical analysis perspective, this reversal from the 50-day moving average confirms a shift in the medium-term trend to bullish. It also confirms the formation of an uptrend, characterized by a series of higher local lows since mid-July.

"As long as favorable conditions persist, gold prices could reach $4,500 per ounce as early as next week," he added. "If gold rises to the $4,700 range in the coming weeks, it may convince skeptics that gold is steadily moving toward a new high."

Tuesday at 14:00, UK public sector net borrowing for August

Tuesday at 22:00: Preliminary Eurozone Consumer Confidence Index for September; U.S. Richmond Fed Manufacturing Index for September

Wednesday, 15:15–16:30: Preliminary September PMIs for France, Germany, the Eurozone, and the UK (Manufacturing and Services)

Wednesday, 21:45, U.S. S&P Global Manufacturing/Services PMI Preliminary for September

Friday at 22:00, the final reading of the University of Michigan Consumer Sentiment Index for September and the final reading of the one-year inflation expectation for September in the United States.

The preliminary PMI readings for U.S. manufacturing and services activity in September will be released next week, providing updated insights into current economic activity as investors digest the Fed’s rate hike this week and assess the outlook for further hikes. PMI data will also be released for the eurozone and the UK.

Given the recent surge in oil prices, these data points will provide a snapshot of the latest status of businesses. Any strong signs in the economy could intensify market expectations of further rate hikes, a signal already conveyed by Federal Reserve policymakers.

The U.S. Department of the Treasury will auction $69 billion in two-year Treasuries next Tuesday, $70 billion in five-year Treasuries on Wednesday, and $44 billion in seven-year Treasuries on Thursday.

In Europe, the European Central Bank raised interest rates as expected at its most recent meeting, driven not only by high oil prices but also by recent evidence of strong economic performance in the eurozone. Investors will now closely monitor upcoming data to determine whether this trend continues. The preliminary PMI readings for France, Germany, and the eurozone in September will be of particular interest.

"Surprisingly strong summer growth has made it easier for the European Central Bank to tighten monetary policy; it will be interesting to see whether the momentum strengthens, particularly in manufacturing," said analysts at Danske Bank in a report.

According to LSEG data, eurozone money markets are currently pricing in at least three additional 25-basis-point rate hikes by the European Central Bank before mid-next year, including one more hike before the end of 2026.

In the UK, the Bank of England held its interest rate steady at 3.75% during its meeting this Thursday. Nevertheless, Governor Bailey acknowledged that inflation risks are rising, suggesting a potential rate hike in the coming months.

LSEG data shows that investors are fully pricing in four rate hikes by the Bank of England before June 2027.

UK public sector fiscal data to be released next Tuesday will also be closely watched, as investors seek signs of the government’s fiscal health ahead of the October 28 budget. Investors will monitor how rising government borrowing costs impact public finances.

Major U.S. stock indices showed mixed performance this week. On Friday’s “Triple Witching” day, approximately $7 trillion in U.S. stock option exposure expired, accounting for about 25% of total U.S. stock option exposure. According to data from Citadel Securities, this was one of the largest options expiration days on record.

Trading volume on U.S. exchanges exceeded 26 billion shares that day, approximately 40% above the 12-month average. As related positions mature or roll over, the market-making hedging mechanisms that have helped suppress market volatility in recent periods are set to reset, potentially leading to a significant increase in market sensitivity to subsequent capital flows.

Traditional wisdom holds that tightening cycles headwind stock markets, as higher interest rates typically increase borrowing costs and may depress the present value of future earnings. However, the past five trading days of the S&P 500 index suggest investors are unfazed by the prospect of “higher for longer,” reassured by strong economic and corporate earnings performance fueled by massive spending in the field of artificial intelligence.

“As long as growth continues and is sufficient to offset the impact of rate hikes, you can still see the stock market continue to rise,” said David Miller, Chief Investment Officer at Catalyst Funds.

But it is equally clear that the road ahead is more challenging than before. Bond yields remain high, oil prices stay above $100 per barrel as the Middle East conflict continues, and the United States will also face a notoriously turbulent midterm election season.

Regarding downside risk, some have pointed out that weakening market breadth and investor complacency suggest further downside potential for equities. Jonathan Krinsky of BTIG noted this week that only 49% of S&P 500 components remain above their 200-day moving average. “An increasing number of stocks are breaking below support levels and the 200-day moving average,” he wrote on Wednesday. “Ultimately, we need to see market sentiment become less complacent, more oversold conditions, and a more significant decline in correlation metrics before we can consider this pullback to be over.”

Additionally, Ed Yardeni lowered his year-end target for the S&P 500 from 8,400 to 7,900. The new forecast suggests that the S&P 500 may still reach a new high this year, but it is significantly below the upside potential implied by his previous estimate.

"The risk of an economic recession in the next three to six months has increased," wrote the president of Adeny Research.

Matt Maley of Miller Tabak said: "There have been no fundamental changes that would lead investors to believe oil prices will drop sharply or that yields will fall significantly in the medium term. We may still see a substantial increase in volatility."

Rick Gardner of RGA Investments said that, amid rising oil prices and bond yields, the market remains "on thin ice" and "we have not yet navigated through the volatility typically seen in September and October."

Daniel Skelly of Morgan Stanley Wealth Management said: “The current narrative in the stock market may be a ‘two-timeframe story.’ In the short term, ongoing macroeconomic uncertainties—such as oil prices, high yields, and the midterm elections—could intensify seasonal volatility. However, the long-term outlook remains optimistic.”

According to CCTV News, upon mutual agreement between China and the United States, He Lifeng, Member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, will lead a delegation to the United States from September 19 to 23 to hold economic and trade consultations with U.S. officials. Rich Privorotsky, Head of European One Delta Trading at Goldman Sachs, wrote that this could become a significant moment for the market.