Gold slips near two-week low as Fed rate hike expectations strengthen

Gold prices declined on Monday, hovering near a two-week low as growing expectations of a Federal Reserve interest rate hike weighed on investor sentiment.

 

Spot gold fell 0.4% to $4,433.19 per ounce by 1739 GMT, after earlier touching its lowest level since August 19.

 

The decline came as markets increased their bets on further monetary tightening by the U.S. Federal Reserve following hawkish remarks from Fed Chair Kevin Warsh. Rising oil prices have also intensified concerns about inflation, potentially giving policymakers additional reason to maintain a tighter monetary policy stance.

 

Higher interest rates typically pressure non-yielding assets such as gold by increasing the opportunity cost of holding bullion.

 

Traders have significantly increased expectations for a September rate hike, with market pricing indicating a 64% probability of further tightening.

 

Meanwhile, precious metals remained on track for a strong monthly performance, with gold and silver eyeing their biggest monthly gains since January. Palladium was also positioned for its strongest monthly performance so far this year.