Fed tightening bets weigh on gold prices
Gold prices have taken a hit, influenced by rising oil rates that have sparked inflation fears and suggested further interest rate hikes may be on the horizon. Spot gold decreased by 0.7%, with US gold futures mirroring the trend. Analysts warned that escalating energy costs may exacerbate inflation, prompting consumers to feel anxious about their financial stability. Additionally, declines were…
Gold prices experienced a decline on Monday as rising oil prices amplified inflation concerns and solidified the anticipation of additional Federal Reserve interest rate increases. Spot gold experienced a 0.7% decrease, trading at $4,254.77 per ounce at 0010 GMT, while US gold futures slipped 0.7% to $4,289.70. Iran reiterated its stance that diplomacy is the only solution to its conflict with the United States and Israel, following US President Donald Trump's rejection of an Iranian proposal to reopen the Strait of Hormuz and cease hostilities.
Oil prices rebounded by over 1%. The Federal Reserve had previously raised rates in the month prior, broadening its target rate range by a quarter percentage point to a range of 3.75% to 4%. According to CME's FedWatch Tool, market participants are pricing in a 66% probability of a US rate hike in October. Higher energy costs can contribute to inflation by increasing expenses throughout the economy.
Gold is commonly regarded as a safeguard against inflation, but it may falter in a high-interest-rate environment as rising yields escalate the opportunity cost of holding the non-yielding metal. In a Friday interview, Cleveland Fed President Beth Hammack expressed her apprehension regarding the potential conditioning of the American public to accept persistent high inflation as the new norm, emphasizing that the central bank cannot allow this to transpire.
A survey revealed that US consumer sentiment dropped to a four-month low in September, driven by worries that rising inflation would diminish households' purchasing power. None of the metals exhibited data or scheduled events for Monday, September 28.
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