Gold prices declined on Monday as a surge in oil prices heightened inflation concerns and bolstered expectations that the U.S. Federal Reserve may increase interest rates at its upcoming policy meeting this week. Spot gold experienced a decline of 0.5%, trading at $4,327.80 per ounce as of 0119, following a third consecutive weekly decrease recorded on Friday. U.S. gold futures for December delivery experienced a decline of nearly 1%, settling at $4,368.60. Traders are currently assigning an approximately 86% probability to a U.S. rate hike at the central bank’s policy meeting on September 15-16, an increase from the roughly 67% likelihood observed before the inflation data was released last week, as indicated by the CME FedWatch Tool.
U.S. consumer prices experienced an uptick in August, with a significant measure of core inflation recording its most substantial rise in four months, according to data released on Friday. This development strengthens the anticipation that the Federal Reserve will implement an interest rate hike this week. Gold is generally regarded as a hedge against inflation; however, elevated interest rates often reduce the attractiveness of non-yielding bullion for investors. Oil prices surged over 2% on Monday, driven by recent Houthi strikes on Saudi Arabia and Iranian assaults on vessels in the Gulf, which intensified supply anxieties in the wake of the shutdown of a crucial Saudi oil pipeline. Middle East diplomacy seemed to stumble following the postponement of a meeting between Iran and other Gulf states.
Goldman Sachs stated on Friday that it continues to perceive upside risk to its projection for gold to attain $4,900 an ounce by the conclusion of 2026, despite anticipating that price volatility will persist at elevated levels. In other developments, two policymakers from the European Central Bank indicated the possibility of additional rate hikes should the rise in energy prices, driven by conflict, translate into wider inflationary pressures within the euro zone. Among other metals, spot silver declined by 1.1% to $63.75 per ounce on Monday, platinum decreased by 0.8% to $1,782.50, and palladium fell by 0.7% to $1,290.36.
