Gold Slumps Below $4,200 Amid Rate Hike Bets and Soaring Oil Prices

Gold prices plummeted more than 3% on Monday to a level below $4,200 as investors reassessed the outlook for US interest rates. The metal has been under pressure from elevated oil prices, rising Treasury yields, and expectations of further Federal Reserve rate hikes.

The U.S.-Iran conflict is now in its eighth month, and oil prices have risen about 70% this year, adding to inflation concerns. Cleveland Fed President Beth Hammack said long-term Treasury yields are being pushed higher by stronger growth expectations, concerns over government debt, and expectations for additional interest rate increases.

The pressure on gold has also come from the bond market, with the yield spread between 10-year and narrowed to as little as 17 basis points last week. Gold ETF holdings have remained firm, rising by about 50 tonnes so far this month, according to ANZ.