Gold Prices Plunge Amid Rate Hike Fears and Iran Conflict
Gold prices are falling as investors worry about interest rate hikes by the Federal Reserve. Fed Chair Kevin Warsh said last Friday that underlying inflation isn't cooling down fast enough and that the Fed still has work to do to bring it back to target.
This sentiment has led traders to price in a higher probability of a September rate hike, with odds jumping from 36% to around 56-58% on the CME FedWatch tool. The target rate probability of a 25-basis point hike is now at 70%, according to the same tool.
The higher interest rates make gold less attractive to investors, as it's a non-yielding asset. Additionally, renewed US military action against Iran has added pressure on gold prices. The Strait of Hormuz was targeted over the weekend, and Iran responded in kind.