Gold near nine-week low on prospects for rate hike by end-2026
Bullion nears US$4,110 an ounce, after falling 1.3% the day before to the lowest since early August
Gold prices have dropped to a nine-week low, trading near US$4,110 an ounce after falling 1.3% the previous day. This decline is due to rising tensions in the Strait of Hormuz, which have led to increased fears of war-related inflation. In addition, investors are considering the possibility of at least one more US rate hike in 2026.
Fresh attacks by Iran on tankers in the key waterway have further heightened these concerns. The US is reportedly considering military strikes against Iranian targets ahead of midterm elections in November. Since the conflict began in late February, gold has declined around 20%, as surging energy costs have fueled inflation and prompted central banks to start tightening monetary policy, which is not favorable for the non-yielding precious metal.
Despite oil flows from the Middle East returning to near pre-conflict levels, elevated risks have driven shipping costs to record highs. Storms in the Gulf of Mexico have also added pressure to energy supplies. Minutes from the last US Federal Reserve meeting revealed that all 19 policymakers supported the September hike decision, with most expecting another in late October.
This has increased the probability of a hike by end-2026 to 80%. The stronger US dollar helps support gold, as it becomes more expensive for most buyers. "The Fed minutes have kept gold under a stubborn ceiling, with policymakers still united in their inflation fight but divided over whether September’s hike was a precaution or the beginning of a tougher tightening campaign," said Hebe Chen, senior market analyst at Vantage Global Prime.
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