Gold Prices Plummet 3% Amid Rising Inflation Concerns and Fed Rate Hike Expectations

Gold prices fell by nearly 3% on a weekly basis due to the repricing of US monetary policy and a surge in crude oil prices raising inflation concerns. On Friday, MCX gold futures (October) edged up 0.03%, while MCX silver futures (September) shed 0.07%. The price of 10 grams of 24-carat gold stood at Rs 1,54,884 on Friday, down from Rs 1,59,578 seen last Friday.

The yellow metal initially found support from geopolitical uncertainty and weakness in the US dollar but was subsequently affected by the escalation in the US-Iran conflict, which surged crude oil prices. This led to heightened inflation concerns, pushing expectations of a September Federal Reserve rate hike sharply higher. As a result, rising Treasury yields and a stronger dollar outweighed safe-haven demand, leading to a sharp correction in precious metals.

However, a midweek rebound was seen after weaker-than-expected US labour-market data and dovish Federal Reserve commentary revived expectations of a less aggressive monetary-policy stance. However, this rebound was short-lived as Friday's August US employment report significantly exceeded expectations, pushing Treasury yields and the US dollar sharply higher.