Gold Prices Slide Amid Higher Oil Prices and Hawkish Repricing
Gold prices declined on Thursday, extending a sharp selloff from the previous session due to growing bets on more Federal Reserve interest rate hikes this year. By 04:40 ET (08:40 GMT), gold had fallen by 0.5% to $4,267.43 an ounce, while platinum had declined by 0.4% to $4,301.17 an ounce.
The Fed's rate outlook is a major concern for gold investors as higher rates tend to weigh on the metal due to its lack of interest payments. Investors are assessing whether an energy-price shock will keep inflation elevated and require further policy tightening. Benchmark oil prices have risen back above $100 a barrel, with hopes fading for an imminent diplomatic resolution to the Iran war.
Iranian President Masoud Pezeshkian told the United Nations that Iran would not allow freedom of navigation through the Strait of Hormuz while a U.S. blockade and sanctions remain in place. This has sparked concerns about stubborn energy-fueled inflationary pressures and resilient U.S. growth, leading to a hawkish repricing in markets.
According to CME FedWatch, the probability of a rate hike in October now stands at 77.5%, up from 55.4% a week ago, while the chances of another borrowing-cost increase in December stand at over 58%. This has sparked a steep selloff in bond markets and placed further downward pressure on gold.
Analysts at Britannia Global Markets note that the importance of a key summit between Trump and Chinese President Xi Jinping later today could impact metals prices. They suggest watching for 'metals-specific language' in the communique.