Gold Prices Plunge Amid Rising Oil Costs and Rate Hike Bets
Gold prices dropped more than 1% on Monday as investors grew concerned about inflation and further interest rate hikes from the Federal Reserve. The rise in oil prices added to these fears, with spot gold falling 1.5% to $4,223.95 per ounce.
A quarter percentage point increase in the Fed's target rate range earlier this month has traders pricing in a 66% chance of another hike in October, according to CME's FedWatch Tool. This has increased the opportunity cost of holding gold, which does not generate interest income like bonds do.
Tim Waterer, chief market analyst at KCM Trade, noted that high bond yields and oil prices are 'continuing to act as a thorn in gold's side.' He also warned that stronger-than-expected inflation or employment numbers could keep upward pressure on bond yields and weigh further on gold.