Oil Price Surge Sparks Gold Price Drop Amid Inflation Concerns

Gold prices fell on Monday as concerns about inflation and interest rates weighed heavily on markets. The precious metal dropped by 0.5% to $4,327.80 an ounce, marking its third consecutive weekly decline.

The main driver behind this downward trend is the rise in oil prices, which has fueled expectations that the US Federal Reserve will raise interest rates at its upcoming policy meeting on September 15-16. According to the CME FedWatch Tool, traders are now pricing in an 86% chance of a rate hike, up from 67% prior to last week's inflation data.

Despite gold typically being seen as an inflation hedge, higher interest rates tend to diminish its appeal to investors. This is because non-yielding bullion becomes less attractive compared to other assets that offer higher yields.