Gold Prices Plummet Amid Middle East Tensions and Rate Hike Fears
Gold prices hit a three-week low on Wednesday due to rising Middle East tensions and their impact on oil prices. The tensions between the US and Iran have led to increased concerns about inflation and potential rate hikes, which are weighing on gold's appeal as an investment.
The price of spot gold fell 0.6% to $4,304.01 per ounce, its lowest since August 7. This marks a fourth consecutive session of losses for gold, with prices remaining below the 200-day moving average, a key technical level.
US gold futures for December delivery also declined by 1% to $4,350.80, while the US dollar held firm, making dollar-denominated metals more expensive for buyers using other currencies.
The recent escalation in US-Iran tensions has added to inflation concerns, with oil prices rising for a third straight session and US Treasury yields advancing. According to Bas Kooijman, CEO of DHF Capital SA, 'A pricier crude could continue to tighten monetary policy expectations and drive yields higher, limiting any rebound potential for gold.'
The Federal Reserve's upcoming policy meeting has traders pricing in a 67% chance of a rate hike, according to the CME FedWatch Tool. This increased likelihood of interest rates rising is weighing on gold's appeal as it offers no yield.