Gold Prices Slip Amid Higher Inflation Expectations and Soaring Oil
Gold prices declined on Monday as hotter-than-expected US inflation data boosted expectations of a Federal Reserve interest rate hike later this week. The rise in inflation, which saw the core consumer price index increase by 0.3% month-on-month, excluding food and energy costs, added to speculation that the Fed could deliver its first rate hike in three years at this week's meeting.
The probability of a September rate increase now stands at around 88%, with higher borrowing costs typically weighing on gold due to the metal generating no interest. This makes yield-producing assets more attractive. President Donald Trump has continued his criticism of the central bank's policy stance, reiterating his calls for lower interest rates.
Meanwhile, the Middle East conflict is complicating the inflation outlook, with Brent crude climbing towards $107 a barrel after rising almost 9% last week. This disruption to energy markets is contributing to higher prices and adding pressure on the economy.