Gold declines as Hormuz impasse keeps rate hike bets elevated
Investors see about a 65% probability of a hike in October
Gold prices declined as concerns over the Strait of Hormuz impasse persisted, prompting a higher likelihood of further interest rate hikes by the US Federal Reserve to combat inflation. The precious metal was traded near US$4,265 per ounce, following a weekly slide of more than 2%. Oil prices rose as Iran refused to adjust its conditions for reopening the waterway, despite US President Donald Trump's proposal, indicating negotiations would resume soon.
The conflict between the two nations has been ongoing for eight months, with Brent crude prices up by 70% this year. Federal Reserve officials, during a mid-September meeting, unanimously decided to raise the benchmark interest rate by 0.25%, and many have suggested additional rate hikes could be necessary. A 65% probability of a rate increase in October was seen by investors.
Consumer sentiment in the United States dropped to a four-month low in September, and the yield difference between 10-year Treasuries and two-year notes narrowed to its narrowest level since early 2025, suggesting a flattening of the yield curve. Gold had been trading in a narrow range between US$4,230 and US$4,510 in September, lower than its record high of nearly US$5,600 in January, but this did not deter sector deals, with South Africa's Gold Fields making an offer to acquire Australia's Northern Star Resources, which was later rejected.
Spot gold prices fell 0.5% to US$4,261.59 an ounce in Singapore, while silver declined 0.8% to US$63.77 an ounce, and both platinum and palladium were down. The Bloomberg Dollar Spot Index, a measure of the US dollar, increased by 0.1% after gaining 2% since the beginning of September.
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