Gold prices fell on Monday as expectations of a US Federal Reserve rate hike strengthened before this week’s policy meeting. Hotter inflation and rising oil prices reinforced bets for tighter monetary policy.
US spot gold declined below $4,300 to $4,292-an-ounce mark by 4:20 PM IST, down about 1.3% from the previous session’s close. US gold futures fell 1.4% to $4,348.50.
The dollar climbed to its highest level in more than a week, pressuring bullion for buyers holding other currencies.
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Markets are now pricing an 89% probability of a Fed rate hike this week, up from 67% before last week’s inflation data.
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Goldman Sachs and HSBC also expect a 25 basis point increase at the Fed’s Tuesday and Wednesday meeting.
US consumer prices accelerated in August, while a key measure of underlying inflation recorded its biggest increase in four months. The data strengthened expectations of a hawkish stance.
“Markets are now fully pricing in a Fed rate hike following last week’s CPI data,” UBS analyst Giovanni Staunovo said. According to Reuters, he added that higher oil prices could intensify inflation concerns.
Oil prices rose about 3% on Monday after strikes targeted Saudi energy and civilian infrastructure. Iranian attacks on Gulf shipping added to supply concerns, while the closure of a key Saudi oil pipeline tightened the outlook.
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Higher interest rates weigh on gold because the metal does not generate interest income.
Other precious metals also weakened. Spot silver fell 1.9% to $63.22 an ounce, platinum dropped 1.4% to $1,770.82, and palladium declined 1.4% to $1,280.97.
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