Gold Drops to US$4,325 as Fed Officials Warn on Inflation
Bullion prices fell 0.7 percent as traders assessed persistent supply shocks and rising interest rates.
Key points
- Spot gold declined 0.7 percent to US$4,349.96 per ounce amid concerns over persistent US inflation.
- Brent crude oil dropped below US$100 per barrel, removing a key inflationary driver for precious metals.
- London bullion auctions showed heavy selling with four times more gold offered than buyer demand.
Spot gold fell 0.7 percent to US$4,349.96 per ounce during Tuesday trading. The metal briefly dropped as much as 1.3 percent to test the US$4,325 level before stabilizing.
Investors reacted to warnings from Federal Reserve officials about persistent inflation. Higher interest rates reduce the appeal of non-yielding assets like precious metals.
Fed officials warn on supply shocks
Chicago Fed president Austan Goolsbee stated that the central bank cannot ignore repeated supply disruptions. He argued that persistent inflation requires a response that may cause economic hardship.
Minneapolis Fed president Neel Kashkari noted that inflation remains above the 2 percent target. He added that price pressures have spread beyond the initial oil-price shock from the Iran conflict.
Oil prices weaken demand for bullion
Brent crude fell below US$100 per barrel on Monday. The decline follows robust flows through the Strait of Hormuz and diplomatic progress regarding the US-Iran war.
Analysts suggest gold will track oil prices and the broader inflation outlook closely. This correlation provides a clearer directional guide in the absence of fresh monetary catalysts.
Market liquidity tightens in London auctions
The London bullion market auction saw heavy selling pressure this week. Traders reported that four times as much gold was offered for sale as buyers wanted to purchase.
