Oil Prices Fuel Gold Price Decline Amid Inflation Concerns and Rate Hike Expectations

Gold prices declined on Monday due to rising oil prices and inflation concerns, which increased expectations of a US Federal Reserve interest rate hike this week.

The spot gold price dropped by 0.5% to $4,327.80 an ounce, while US gold futures for December delivery fell nearly 1% to $4,368.60.

Traders are pricing in about 86% chance of a US rate hike at the central bank's policy meeting on September 15-16, up from about 67% prior to inflation data last week, according to the CME FedWatch Tool.

The increase in oil prices was fueled by Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf, which compounded supply concerns following the closure of a key Saudi oil pipeline.

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