Gold Slumps Amid Fed Rate Hike Bets and Soaring Oil Prices

Gold prices weakened on Tuesday amid growing expectations of a Federal Reserve interest rate hike. The central bank is widely anticipated to raise rates for the first time since July 2023, which would strengthen the dollar and make gold more expensive for foreign buyers.

The FedWatch tool shows that the chances of a 25 basis point rate hike on Wednesday stand at 94.5%, up from 59% last week. Higher interest rates tend to weigh on non-yielding assets like gold, which includes gold futures that slipped 0.4% to settle at $4,333.95/oz.

The rise in rate hike expectations has been driven by a relentless rout in the U.S. bond market, inflationary concerns from spiking oil prices, and increasingly hawkish commentary from Fed policymakers. The 10-year Treasury yield hit multi-year highs before the Fed's decision, closing at 5.004% on Tuesday.

Oil prices also surged, with global benchmark Brent crude climbing 2.7% to settle at $108.51 a barrel. U.S. West Texas Intermediate crude futures advanced 4.1% to settle at $105.52 a barrel, driven by supply disruptions and diplomatic efforts between the U.S. and Iran.