Gold hits seven-week low as oil surge fuels rate hike bets
Spot gold was down 3.8% at US$4,121.58 per ounce, after falling as much as US$4,110.55, its lowest since Aug 5.
On September 28, gold prices plummeted after a surge in oil prices prompted concerns of inflation and heightened expectations of tighter monetary policy. The precious metal slipped 4% to trade at a seven-week low of $4,121.58 per ounce, its lowest since August 5. Spot gold fell to $4,110.55, while futures dropped to $4,153.70. Analyst Jim Wyckoff explained that the spike in crude oil prices, coupled with elevated Treasury yields and a strong US dollar, created "a perfect storm to push the metals prices sharply lower."
The US dollar had reached a two-month high, making greenback-priced bullion more costly for overseas buyers. Meanwhile, US Treasury yields continued to climb, increasing the disadvantage of holding non-yielding gold. Despite gold's reputation as an inflation hedge, higher interest rates diminished its appeal as investors favored assets yielding income.
CME’s FedWatch Tool projected a 94% probability of a rate hike in December, following the Federal Reserve's recent rate increase and its forecast of additional hikes. Fed officials have expressed worries about inflation risks, with some, like Cleveland Fed President Beth Hammack, suggesting further rate hikes may be necessary. The focus now shifts to job openings data, the ADP employment report, Personal Consumption Expenditures readings, and nonfarm payrolls, all released this week. Silver, platinum, and palladium also experienced declines during the same period.
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