Gold and Silver Prices Plummet Ahead of Fed Rate Decision Amid Rising Inflation Expectations
Gold and silver prices are falling ahead of the Federal Reserve's rate decision on Wednesday. The recent escalation in Middle East violence, including a shut oil pipeline and a struck vessel in the Strait of Hormuz, would normally push investors toward gold. However, traders are repricing the odds of a Fed rate hike instead.
Gold is trading near $4,290 an ounce this morning, down from Friday's close, after futures opened at $4,375. Silver sits near $63.03, off as much as 2.9% intraday from Friday's levels.
The reason for the price drop has almost nothing to do with the Middle East violence. Instead, it's due to rising oil prices lifting inflation expectations and increasing the likelihood of a rate hike on Wednesday.
CME Group's FedWatch tool shows that the market-implied probability of a 25-basis-point hike at Wednesday's meeting climbed to 86.5% this morning, up from 69.4% on Friday morning.