Gold Prices Plummet as Oil Surge Fuels Inflation Fears Ahead of Fed Meeting
Gold prices fell on Monday, September 14, as rising oil prices fueled inflation concerns ahead of the US Federal Reserve's policy meeting. The rise in oil prices comes after a key Saudi oil pipeline was closed, and fresh Houthi attacks on Saudi Arabia and Iranian attacks on ships in the Gulf raised concerns about global crude supplies.
The price of Brent crude futures rose 2.30% to $107 a barrel, while US West Texas Intermediate (WTI) crude futures gained 2.36% to $102.40 a barrel. This surge in oil prices added to concerns that inflation could remain elevated in the US, making it harder for the Fed to ease monetary policy.
Markets are now pricing in an 86.7% probability of a rate hike at the Fed's September 15-16 meeting, according to the Chicago Mercantile Exchange’s (CME) FedWatch Tool. This higher probability of a rate hike supports US Treasury yields and the dollar, increasing the opportunity cost of holding gold.
The combination of higher oil prices, renewed inflation concerns, and rising expectations of tighter US monetary policy has taken some shine off gold ahead of the Fed's decision.