Gold Slides to One-Month Low as Oil Surge Fuels Fed Rate-Hike Bets

Gold prices fell to their lowest level in more than a month on Monday as a sharp rise in oil prices and stronger-than-expected US inflation data increased expectations of a potential Federal Reserve rate hike this week.

 

Spot gold declined 0.8% to $4,312.59 per ounce by 1:30 p.m. EDT, after touching its lowest level since August 7. US gold futures also dropped 1.3% to $4,351.90.

 

Markets are increasingly focused on the Federal Reserve’s upcoming policy decision on Wednesday. Traders were pricing in around a 93% probability of a rate increase, reflecting growing concerns that persistent inflation could limit the central bank’s ability to maintain an easier monetary stance.

 

Higher interest-rate expectations have weighed on gold because the precious metal does not generate interest income. Rising yields can therefore reduce the appeal of holding non-yielding assets.

 

The increase in oil prices has added to inflation concerns. Crude prices jumped as much as 4% on Monday amid renewed worries over energy supply disruptions and heightened geopolitical tensions in the Middle East.

 

The prospect of higher energy costs has raised concerns about further inflationary pressure, strengthening the case for tighter US monetary policy.

 

Geopolitical developments have also remained in focus, with Gulf Arab states calling off a planned meeting with Iran, adding to uncertainty surrounding the regional conflict and energy markets.