Gold prices plunged to a more than one-month low on Monday, driven by a sharp rally in crude oil and stronger-than-expected inflation data that significantly increased expectations for an upcoming U.S. Federal Reserve interest rate hike.
Precious metals faced severe downward pressure as surging energy markets and renewed geopolitical conflict in the Middle East reshaped trader expectations. Spot gold dropped 1.8% to $4,271.59 per ounce, hitting its lowest mark since August 7, while U.S. gold futures fell 2.2% to $4,311.20, according to market data reported on Monday. Subsequent trading sessions saw spot gold (XAU/USD) drop 0.3% to $4,317.54 an ounce at 21:31 ET (01:31 GMT), with gold futures declining 0.7% to $4,364.36 as additional economic headwinds mounted, the outlet noted. Gold fell to a more than one-month low as a rally in oil prices and stronger-than-expected inflation data on Friday bolstered expectations of a rate hike at the U.S. Federal Reserve’s policy meeting this week. Crude Oil Rally and Middle East Conflict Stoke Inflation Concerns
Gold falls to more than one-month low as oil
Energy markets experienced major disruptions following new strikes on Saudi Arabian energy and civilian infrastructure alongside Iranian attacks on ships in the Gulf. These events compounded existing supply concerns following the closure of a key Saudi oil pipeline, sending Brent crude above $95 a barrel and U.S. crude surpassing $91 as investors assessed the threat of prolonged disruptions to energy shipments through the Strait of Hormuz. The escalation followed nearly a month of relative calm, marking a sharp escalation in renewed fighting between the United States and Iran. Middle East diplomacy appeared to falter with the postponement of a meeting between Iran and other Gulf powers. “We’ve got crude oil prices that are sharply higher today, which is driving inflation expectations that suggest the major central banks of the world are going to have to tighten their monetary policies to control inflation, and that’s bearish for the metals,” said Jim Wyckoff, a market analyst at American Gold Exchange. Federal Reserve Rate Hike Probabilities Surge
The jump in crude prices coincided with firm domestic inflation figures released by the labor department’s Bureau of Labor Statistics on Friday. The Consumer Price Index increased 0.4% last month after edging up 0.1% in July. This data quickly reversed a fragile no-change consensus that prevailed before official data on Friday showed firm inflation. A majority of economists polled by Reuters expect the Federal Reserve to raise its interest rate on Wednesday and deliver at least one more hike by the end of March. Financial markets reacted sharply to the shifting data landscape. Traders are pricing in about an 89% chance of a rate hike at the Federal Reserve’s policy meeting, according to the CME FedWatch tool, while markets are now pricing in nearly a 70% probability of a Fed rate hike at the September 15-16 meeting. Expectations for higher rates have also been supported by Kevin Warsh’s hawkish Jackson Hole remarks and comments from Michael Barr, who warned Tuesday that policymakers should be ready to raise rates if inflation remains persistent. The Bank of Japan is also expected to raise interest rates on Friday, amid rising energy prices and little sign of easing Middle East tensions. Bond Yields and Currency Pressures Weigh on Precious Metals
Gold Prices Slide as Iran Conflict Fuels Fed Rate
Beyond rate hike speculations, the broader fixed-income and currency markets exerted heavy influence on bullion valuations, fueling a global bond selloff. The 30-year U.S. Treasury yield climbed above 5.28%, returning to levels seen before Scott Bessent expanded bond buybacks on August 19. Global government yields have meanwhile reached their highest levels since 2008. Simultaneously, the U.S. Dollar Index gained 0.1% to 99.76, rising to a two-week high and making greenback-priced bullion more expensive for holders of other currencies. Gold has now fallen nearly 6% over three sessions, reaching a two-week low as surging oil prices, rising bond yields and a stronger dollar weigh on demand for the precious metal. ANZ expects concerns over sovereign debt and currency depreciation to continue supporting longer-term gold demand, although rising yields have weakened near-term momentum.
| Precious Metal | Spot Price Movement |
|---|---|
| Spot Gold (XAU/USD) | $4,317.54 per ounce |
| Spot Silver | Down 2.5% to $62.88 per ounce (also fell 0.3% to $63.92) |
| Platinum | Down 2% to $1,759.87 per ounce (lost 0.7% to $1,731.81) |
| Palladium | Down 0.6% to $1,291.50 per ounce |
The contraction affected the wider precious metals complex alongside gold. Silver fell 0.3% to $63.92 an ounce, platinum lost 0.7% to $1,731.81, and palladium fell 0.6% to $1,291.50. Technical sentiment has also deteriorated after gold broke below its closely watched 200-day moving average. Although gold is typically seen as an inflation hedge, higher interest rates tend to reduce the appeal of the non-yielding bullion.
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