Gold Crashes on Rate Hike Bets and Iran Oil Deal Rejection

Gold suffered its largest single-day decline since June 9th, closing $172 below Friday's close for a loss of 3.98%. The metal broke through key Fibonacci retracement levels, with its price slicing through both the 61.8% and 78.6% retracement levels of the August rally.

The chart damage was severe, with gold gapping lower on the opening hour and losing critical support at $4,298 (61.8% Fib.) within the first hour of trading. From there it was hour after hour of red candles, taking gold right down to the next support level at $4,174 (78.6% Fib.) by 4:00 AM ET.

The move was triggered by Iran's rejection of a proposal from Foreign Minister Abbas Araghchi to reopen the Strait of Hormuz within seven days in exchange for Washington lifting sanctions on Iranian oil and releasing frozen funds. The US had turned down the offer over the weekend, saying 'They made a proposal but I rejected it'.

Oil prices near $107 add directly to headline inflation, exactly what hawkish policymakers point to when they argue for more tightening. The Fed already raised its target range to 3.75%-4.00% on September 16, and money markets now price a 65.9% chance of another hike at the October 27-28 meeting.