Gold Prices Tumble as Oil Surges and Fed Rate Expectations Shift

Gold prices declined on Tuesday as Treasury yields rose and oil prices increased. The rise in Treasury yields, which is the opportunity cost of holding non-yielding bullion like gold, contributed to the decline in gold prices. Spot gold fell 0.5% to $4,391.14 per ounce, while U.S. gold futures for December delivery dropped 0.6% to $4,446.70.

The increase in oil prices is also putting pressure on gold, with analysts citing the ongoing uncertainty in the Middle East as a key factor. Soni Kumari, an ANZ analyst, noted that traders' expectations around Federal Reserve policy rates will be important for gold, particularly when it comes to technical levels. Elevated energy prices tend to raise inflationary fears and bolster expectations of higher interest rates by the Fed.

Market pricing for a September quarter-point hike flipped to a nearly 65% chance of a 'hold' after unexpected job losses in July, lower-than-expected consumer price inflation, and weaker retail sales. Investors are awaiting minutes from the Fed's most recent policy meeting, which is scheduled for Wednesday. Spot gold may test a support at $4,381, with a break below potentially opening the way toward the $4,320 to $4,351 range.