Oil-Driven Rate Hike Expectations Crush Gold Prices
Spot gold prices plummeted nearly 4% to $4,110.55 an ounce on September 28, reaching its lowest point since August 5. However, it rebounded slightly by 0.6% to $4,140.10 the following day.
The sharp decline in gold prices was largely attributed to the rising oil prices, which increased the chances of a Federal Reserve interest rate hike in October to 70%, according to CME FedWatch. This shift in market sentiment made yielding assets more attractive compared to gold.
Ricardo Evangelista, Director and Chief Executive Officer of ActivTrades, stated that Tuesday's 0.6% gain was merely a rebound from Monday's significant drop and noted that the overall sentiment had not changed. Despite this, the World Gold Council recorded $18 billion in gold ETF inflows in August, highlighting investors' continued interest in gold.
However, if inflation data on September 30 and October 2 payroll reports show softer numbers, it could reduce rate hike expectations and create room for a potential rebound in gold prices. Additionally, if real yields fall alongside the decline in oil prices, it may weaken the pressure on gold and support a recovery.