Gold Prices Sink as Oil Prices Surge and Rate Hike Looms
Gold prices declined on Monday as oil-driven inflation concerns weighed heavily on investors. The precious metal's appeal to investors tends to diminish when interest rates rise, and with a potential US rate hike looming, gold is facing downward pressure.
The spot price of gold dipped 0.5% to $4,327.80 an ounce by 0119 GMT, following three consecutive weekly declines on Friday. U.S. gold futures for December delivery fell nearly 1% to $4,368.60. The market is pricing in about an 86% chance of a US rate hike at the central bank's policy meeting on September 15-16.
The inflation concerns were fueled by accelerating consumer prices and a key measure of underlying inflation posting its largest increase in four months. Oil prices jumped more than 2% on Monday after fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf compounded supply concerns following the closure of a key Saudi oil pipeline.
Goldman Sachs still sees an upside risk to its forecast for gold to reach $4,900 an ounce by the end of 2026, although it expects price volatility to remain elevated. Meanwhile, two European Central Bank policymakers left the door open to further rate hikes if conflict-driven increases in energy prices feed through to broader inflation in the euro zone.