Gold Holds Ground as Oil Prices and Inflation Fuel Rate-Hike Bets
The price of gold held its ground despite a decline in the previous session as rising oil prices and inflation fueled bets for a US interest rate hike at the upcoming Federal Reserve meeting.
Bullion was little changed near $4,320 an ounce after dropping 1.8 per cent to its lowest since early August. The latest US inflation report showed the producer price index rose 0.4 per cent in August, the most since May.
The surge in oil prices, driven by escalating tensions in the Middle East, has put pressure on gold as it competes with other assets for investor attention. Benchmark Brent crude pushed higher to near $108 a barrel amid hostilities between Iran and the US.
Bond yields also rose after lower-than-expected purchases by the US Treasury Department during its first expanded buyback operation, raising doubts about the effectiveness of this unusual intervention aimed at stabilising the market and curbing the jump in long-term yields. Gold tends to perform worse when yields are high, which could be bad news for investors holding bullion.