Gold Prices Plummet Amid Oil Rally and Inflation Fears
Gold prices plummeted to their lowest level in over a month on Monday, as rising oil prices and strong inflation data fueled expectations of a rate hike by the US Federal Reserve. The Consumer Price Index (CPI) rose 0.4% last month, surpassing July's 0.1% increase, according to the Bureau of Labour Statistics. This has led economists to predict an interest rate hike on Wednesday, with a majority polled by Reuters expecting at least one more hike by the end of March.
As a result, gold prices fell 1.8% to $4,271.59 per ounce, while US gold futures dropped 2.2% to $4,311.20. Analyst Jim Wyckoff stated that crude oil prices are driving inflation expectations, suggesting major central banks will tighten their monetary policies, which is bearish for metals.
The Bank of Japan is also expected to raise interest rates on Friday due to rising energy prices and ongoing Middle East tensions. Despite gold's traditional role as an inflation hedge, higher interest rates tend to reduce the appeal of non-yielding bullion. The dollar rose to a two-week high, making greenback-priced bullion more expensive for holders of other currencies.