Oil-Driven Inflation Concerns Weigh on Gold Prices

Gold prices have dipped as concerns over inflation weigh in on the market. Oil prices surged more than 2% on Monday after fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf fueled supply worries.

The increase in oil prices has led to heightened expectations that the U.S. Federal Reserve will raise interest rates at its policy meeting this week, which would diminish gold's appeal as an inflation hedge.

According to the CME FedWatch Tool, traders are pricing in about an 86% chance of a rate hike, up from around 67% prior to last week's inflation data. U.S. consumer prices accelerated in August, while a key measure of underlying inflation posted its largest increase in four months.

Goldman Sachs still sees upside risk to its forecast for gold to reach $4,900 an ounce by the end of 2026, but expects price volatility to remain elevated.