$100 Oil Prices Send Gold into Tailspin as Fed Hike Looms
International oil prices have surpassed $100 per barrel due to the ongoing conflict between the US and Iran, causing concerns about inflation and interest rate hikes. The situation is putting downward pressure on gold prices, despite strong buying by central banks.
The price of gold (3.75 grams) on the Korea Gold Exchange has dropped significantly from nearly 900,000 won last month to 827,000 won. International gold prices are around $4,340 an ounce, while platinum and silver are priced at 338,000 won and 11,680 won, respectively.
The World Gold Association reports that central banks purchased a record 288.9 tons of gold in the second quarter, up 62% from the same period last year. However, inflationary pressures due to high oil prices and interest rate hikes are limiting gold price increases.
Ok Branch, a researcher at Samsung Futures, notes that the instability in the US government bond market and inflationary pressure due to high oil prices are key variables influencing gold prices. He also points out that if oil prices and inflation caused by the war strengthen tightening expectations, demand for gold could decrease.
The Federal Open Market Committee (FOMC) is set to meet from September 15-16, with a 86.2% probability of a 0.25 percentage point hike in interest rates. Samsung Futures predicts that international gold prices will move between $4,100 and $4,750 an ounce by the end of the year.
However, if the US and Iran agree to a ceasefire, normalizing oil prices and easing inflationary pressures, gold prices could test the $5,000 mark. According to researcher Ok, 'Although it is unlikely at the moment, if the Strait of Hormuz is actually normalized due to the US-Iran ceasefire, the price of gold could test more than $5,000 as oil prices return to the $70 range.'