Gold Prices Plummet Amid Hawkish Fed Bets, US-Iran Tensions
Gold prices continued their decline on Monday, hitting a one-and-a-half-week low as traders increased their bets for an interest rate hike by the Federal Reserve (Fed) in response to inflationary pressures. Fed Chair Kevin Warsh's remarks at the annual symposium in Jackson Hole, Wyoming, acknowledged that inflation is running hot and hinted that interest rates could need to move higher if more progress isn't made on easing price pressures.
Traders are now pricing in a 60% chance of a rate hike in September and an 88% probability of an increase in December, according to the CME Group's FedWatch Tool. This has lifted the US Dollar (USD) to a two-week high, leading to a 3% fall in Gold prices.
Escalating US-Iran tensions have also fueled inflation fears, bolstering hawkish Fed expectations and lifting crude oil prices. However, despite the supportive fundamental backdrop, the safe-haven USD struggles to attract follow-through buying amid soft US Treasury bond yields.