Oil Price Surge Sends Gold Plummeting Below $4,200

Gold prices have plummeted to their lowest since early August, falling below $4,200. The decline is largely due to rising oil prices, which are reviving inflation fears and strengthening expectations of another Fed rate hike in October.

The rise in oil prices has pushed the probability of a Fed rate increase to 66% on Monday, up from previous levels. This increase in interest rates makes bonds more competitive with gold, which produces no income.

The unusual aspect of this selloff is that higher oil prices are typically seen as a safe-haven asset, protecting against inflation. However, the current situation is different, with expensive energy pushing transportation, manufacturing, and consumer costs higher.