Key Takeaways
- Gold prices declined as oil prices surged, boosting inflation concerns.
- Market analysts predict a high chance of US Federal Reserve raising interest rates.
- Oil prices increased due to geopolitical tensions in the Middle East.
Gold prices fell on Monday, with spot gold dropping 0.3% to $4,334.31 per ounce by 0330 GMT, following a third consecutive weekly decline.
The decline in gold prices was driven by a significant rise in oil prices, which stoked inflation concerns, leading to increased expectations of interest rate hikes by the US Federal Reserve.
Traders are now pricing in an 86.5% chance of a US rate hike at the central bank’s policy meeting on Tuesday and Wednesday, up from about 67% before the latest inflation data.
Tim Waterer, chief market analyst at KCM Trade, commented, 'Gold isn’t finding conditions to its liking. Rising energy prices plus climbing rate expectations ahead of the Fed and BoJ meetings are delivering a clear yield headwind for gold.'
The US consumer price index accelerated in August, while a key measure of underlying inflation posted its largest increase in four months, reinforcing expectations of a rate hike.
Meanwhile, the Bank of Japan (BoJ) is also expected to raise rates on Friday, as persistent inflation and resilient economic growth have raised the prospect of further rate hikes by major central banks, amid rising energy prices and little sign of easing tensions in the Middle East.
Oil prices jumped more than 2% on Monday following fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf, which compounded supply concerns.
Among other metals, spot silver fell 0.7% to $64.02 per ounce, while platinum remained steady at $1,796.90, and palladium was little changed at $1,298.80.
Gold isn’t finding conditions to its liking. Rising energy prices plus climbing rate expectations ahead of the Fed and BoJ meetings are delivering a clear yield headwind for gold.
Tim Waterer, Chief Market Analyst at KCM Trade
