Gold Tumbles to One-Week Low as Oil Prices Rise and Fed Hawks
Gold prices plummeted to a one-week low on Thursday as a surge in oil prices and a hawkish shift in Federal Reserve rhetoric weighed heavily on the market.
The spot price of gold fell by 0.9% to $4,249.37 per ounce at 11:20 a.m. ET (1520 GMT), while US gold futures for December delivery dropped 0.8% to $4,285.00.
According to David Meger, director of metals trading at High Ridge Futures, 'Gold continues to be burdened by higher energy prices along with higher interest rates... with higher energy prices, the expectation of inflationary concerns grows and the potential for additional rate hikes by the Fed.'
The price of oil rose over 1% after diplomatic talks between the US and Iran showed little sign of progress. This increase in energy costs can lead to higher headline inflation, forcing central banks to adopt more restrictive policies.
Gold's appeal as an inflation hedge is being tarnished by rising interest rates, which are making the non-yielding metal less attractive. The dollar hit a two-month high, making greenback-priced gold more expensive for overseas buyers.