Oil Price Surge Triggers Gold Sell-Off as Hawkish Fed Expectations Soar

A sharp surge in oil prices has triggered a perfect storm that has pushed gold prices sharply lower. On Monday, September 28, spot gold plunged 4% to close at $4,114.93 per ounce, its lowest since August 5. U.S. gold futures also settled down 3.5%, at $4,168.40.

The trigger for this round of sharp gold price declines came from the crude oil market. U.S. President Trump's rejection of Iran's proposed peace deal led to a surge in oil prices, with Brent crude futures closing up 0.9% at $105.28 per barrel and U.S. crude futures gaining 0.2% to close at $92.60 per barrel.

The sharp rise in oil prices has stoked inflation concerns, which have directly dealt a severe blow to gold. Jim Wyckoff notes that a sharp rise in crude oil prices suggests that price inflation could become even more challenging, implying the Federal Reserve will adopt a tighter monetary policy.