Gold could face another volatile month in September, with several factors determining whether prices recover or decline further. 

Last month handed gold a strong rally, but since then, gold has pulled back, with prices currently sitting around $4,400/oz, which is below the late-August peak of approximately $4,685 but significantly higher than where gold started in August.

With September expected to bring several key economic developments, Rick Kanda, Managing Director at The Gold Bullion Company, has shared his predictions for gold prices this month and the factors investors should watch.

What could happen to gold prices in September?

“I predict that September could be another highly volatile month for the precious metal, with potential for sharp gains as well as pullbacks. Gold has recently come under increased pressure following a change in expectations around US interest rates; in fact, there is now a 60% chance of a US interest rate hike at the Fed’s meeting next week on 15th-16th September, up from 40% a week earlier.

“Having said that, I don’t think the wider factors supporting the precious metal have completely disappeared, but yes, the biggest event to watch will be the Fed’s next meeting. Higher interest rates generally put further pressure on gold because gold does not generate interest or income. However, if US inflation data comes in softer than expected next week, we could see markets scale back rate-hike expectations, weakening the dollar and giving gold another boost.

Could gold return to its late-August peak?

“If we see a combination of a weaker US dollar, easing interest rate expectations, as well as continued geopolitical uncertainty, I think gold could have a chance at returning to its late-August peak of $4,685. However, I don’t think gold will move in a straight line towards new record highs. Gold surged nearly 10% in August, its best monthly gain since January. When gold rises this quickly, some investors may sell to lock in profits, particularly if economic data strengthens the case for higher interest rates.

“With that said, there is still the possibility of gold moving back towards $4,685, but I would expect considerable fluctuations along the way. Investors should also be prepared for prices to potentially fall towards the low-$4,000s if rate-hike expectations continue to rise.”