Gold Slumps on Rising Oil Prices, Hawkish Fed Rhetoric
Gold prices declined on Thursday to a one-week low due to rising oil prices and a hawkish shift in Federal Reserve rhetoric. Spot gold fell 0.4% to $4,271.16 per ounce as of 9:35 a.m. ET (1335 GMT), after hitting its lowest since September 16. The US dollar also reached a two-month high, making greenback-priced gold more expensive for overseas buyers.
The rise in oil prices was due to diplomatic talks between the US and Iran showing little sign of progress. This led to higher energy prices, which can feed into headline inflation as manufacturers pass on higher costs. As a result, central banks are adopting more restrictive policy stances to reign in price pressures.
The Federal Reserve's decision last week to raise interest rates for the first time in three years and signal further rate hikes this year has also put pressure on gold. Traders now price a 66% chance of a rate hike in October, according to CME's FedWatch Tool. Rising interest rates have reduced gold's appeal as an inflation hedge.
Analysts are watching for support levels around $4,235 and potentially the June-July area around $4,000 if prices break below this level.