Gold Crashes to Seven-Week Low as Oil Fears Fuel Rate Hike Bets

Gold prices plummeted to a seven-week low on Monday as rising oil costs stoked inflation fears, bolstering bets for higher interest rates. Spot gold dropped 3.1% to $4,155.67 per ounce by 10:31 GMT, marking its lowest since August 5.

The dollar held firm, making gold more expensive for holders of other currencies, while US Treasury yields extended gains.

UBS analyst Giovanni Staunovo attributed the recent weakness in gold to higher oil prices and increased probability of further US rate hikes. He warned that this backdrop could keep US real yields and the US dollar elevated, raising the opportunity cost of holding non-yielding gold and contributing to near-term volatility in the precious metal.