Gold slips as oil rally fans rate hike bets ahead of Fed meeting
Gold prices eased on Monday as a surge in oil prices stoked inflation concerns, boosting expectations that the U.S. Federal Reserve may raise interest rates at its policy meeting this week.
Chalinee Thirasupa | Bloomberg | Getty Images
Gold prices eased on Monday as a surge in oil prices stoked inflation concerns, boosting expectations that the U.S. Federal Reserve may raise interest rates at its policy meeting this week.
Spot gold slipped 0.3% to $4,334.31 per ounce by 0330 GMT after posting a third consecutive weekly decline on Friday. U.S. gold futures dropped 0.8% to $4,375.00.
“Gold isn’t finding conditions to its liking. Rising energy prices plus climbing rate expectations ahead of the Fed and BoJ meetings are delivering a clear yield headwind for gold,” said Tim Waterer, chief market analyst at KCM Trade.
“In the meantime, dips should still find buyers as an uncertainty hedge while geopolitics and rate policy remain fluid.”
Reinforcing expectations that the Fed will raise interest rates, data last week showed U.S. consumer prices accelerated in August, while a key measure of underlying inflation posted its largest increase in four months.
Traders are pricing in about an 86.5% chance of a U.S. rate hike at the central bank’s policy meeting on Tuesday and Wednesday, up from about 67% prior to inflation data last week, according to the CME FedWatch Tool.
The BOJ is also widely expected to raise rates on Friday, as persistent inflation and resilient economic growth have raised the prospect of further rate hikes by major central banks, amid rising energy prices and little sign of easing tensions in the Middle East.
Although gold is typically seen as an inflation hedge, higher interest rates tend to reduce the appeal of non-yielding bullion.
Oil prices jumped more than 2% on Monday after fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf compounded supply concerns following the closure of a key Saudi oil pipeline.
Middle East diplomacy appeared to falter after a meeting between Iran and other Gulf states was postponed.
Among other metals, spot silver slipped 0.7% to $64.02 per ounce, platinum steadied at $1,796.90, and palladium was little changed at $1,298.80.
