Gold Prices Slump Amid Fed Tightening Bets and Rising Oil Costs
Fed tightening bets weighed heavily on gold prices on Monday as oil prices rebounded more than 1% and reinforced expectations of further Federal Reserve interest rate hikes.
The Fed raised rates earlier this month, lifting its target rate range by a quarter percentage point to between 3.75% and 4%, with traders pricing in a 66% chance of a US rate hike in October via CME's FedWatch Tool.
A rise in oil prices heightened inflation concerns, which can fuel inflation by raising costs across the economy. Gold is widely viewed as a hedge against inflation but struggles in high interest-rate environments as rising yields increase the opportunity cost of holding non-yielding metals like gold.
Cleveland Fed President Beth Hammack expressed concern that persistently high inflation risks conditioning Americans to accept elevated prices as normal, and central banks cannot let this happen. US consumer sentiment slipped to a four-month low in September amid worries about rising inflation eroding households' purchasing power.