Gold Tumbles as Oil Prices Soar Amid Hawkish Fed Expectations

Gold's price has fallen to $4,052.30 per troy ounce, down 2% from earlier in the session. The decline marks a sharp reversal from the start of the day when gold briefly pushed above $4,100.

The sell-off is attributed to surging crude prices and hawkish Federal Reserve expectations. Brent crude has surged past $100 a barrel, while West Texas Intermediate jumped over 6% to top $92.

Higher oil prices have reignited inflation fears, which in turn has raised expectations that the Federal Reserve will need to keep interest rates elevated or even raise them further to contain price pressures.

For gold, a higher rate environment is detrimental as it increases the opportunity cost of holding non-yielding assets like bullion. The market is already pricing in this shift with Fed funds futures assigning an 78% probability to a rate hike at the September FOMC meeting.