Gold Crashes Below $4,200 Amid Rising Oil Costs and Higher Interest Rates
Gold prices plummeted on Monday, dipping below $4,200 an ounce as rising oil costs and higher US bond yields intensified expectations that the Federal Reserve may maintain its tightening policy.
The spot gold price fell by 2.1% to $4,198.10 an ounce, while US gold futures dropped 2.1% to $4,231.
This move has put bullion on course for its steepest daily decline since September 1 and continues the downward pressure that pushed it lower last week.
Gold's traditional inflation hedge effect was unexpectedly backfiring as investors treated higher energy costs as a reason for the Fed to remain hawkish, rather than being a cause for concern about inflation.
Oil prices have surged above $106 a barrel after US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and end the conflict, keeping supply concerns elevated.
The combination of higher oil and interest rates is difficult for bullion, as it increases the opportunity cost of holding an asset that pays no income. Higher real yields are keeping the $4,200 area in focus.