Gold Slides to 4327.80 as Oil Spikes and Fed Hike Odds Rise
Spot gold fell 0.5 percent to 4,327.80 US dollars per ounce on Monday. This decline followed a third consecutive weekly drop. Rising oil prices fueled inflation fears, shifting market focus to the Federal Reserve.
Spot gold closed at 4,327.80 US dollars per ounce, marking a 0.5 percent drop. This price action followed a third straight weekly decline that ended on Friday. US gold futures for December delivery also weakened, falling nearly 1 percent to 4,368.60 US dollars. The market reacted to a sharp increase in oil prices, which intensified inflation concerns. Traders now expect the US Federal Reserve to raise interest rates at its upcoming policy meeting.
According to the CME FedWatch Tool, the probability of a rate hike on September 15-16 stands at 86 percent. This figure represents a significant jump from the 67 percent estimated prior to last week's inflation data. US consumer prices accelerated in August, with core inflation posting its largest increase in four months. Higher interest rates reduce the appeal of non-yielding assets like gold. Consequently, the precious metal faces downward pressure despite its traditional role as an inflation hedge.
Oil Surge Drives Inflation Fears
Oil prices jumped more than 2 percent on Monday. This spike followed new Houthi attacks on Saudi Arabia and Iranian strikes on Gulf shipping. These events compounded supply worries after the closure of a key Saudi pipeline. Diplomatic efforts in the Middle East also stalled after a meeting between Iran and Gulf states was postponed. Energy price shocks threaten to feed into broader inflation in the euro zone.
Two European Central Bank policymakers indicated they remain open to further rate hikes. They cited the risk that conflict-driven energy costs will impact general price levels. This hawkish stance aligns with the US market's expectation of tighter monetary policy. The combined pressure from the Fed and the ECB supports a stronger dollar, which typically weighs on gold prices.
Broad Metal Declines and Forecasts
Other precious metals also recorded losses on Monday. Spot silver slipped 1.1 percent to 63.75 US dollars per ounce. Platinum dropped 0.8 percent to 1,782.50 US dollars, while palladium slid 0.7 percent to 1,290.36 US dollars. GN auto markets/commodities: gold prices data confirms the sector-wide weakness. Goldman Sachs maintains its forecast for gold to reach 4,900 US dollars by the end of 2026. However, the bank expects continued high volatility in the near term.
