Gold Price Struggles Amid Rising Commodity Prices
Gold prices are struggling in September after its biggest monthly gain this year. According to Ole Hansen, Head of Commodity Strategy at Saxo Bank, gold is facing headwinds due to short-term inflation fears driven by rising commodity prices. This trend is evident as West Texas Intermediate (WTI) crude oil prices pushed back to $90 a barrel overnight.
Hansen noted that the ongoing war in Ukraine and poor weather conditions around the world are driving grain and soft commodity prices higher, led by sugar, wheat, and corn. The Bloomberg Commodity Agriculture Total Return Index surged 12.4% in August to a 14-year high.
Gold's selloff started after Federal Reserve Chair Kevin Warsh reiterated his commitment to bringing inflation down to the central bank's 2% target at the Federal Reserve Symposium in Jackson Hole, Wyoming. This led to higher short-term rate expectations and rising real and nominal yields.
Hansen stated that gold remains supported by long-term factors such as growing government debt and currency debasement fears. However, he noted that higher real rates driven by a credible inflation-fighting central bank are normally negative for gold.