Gold fell on Monday after hotter-than-expected US inflation data lifted bets on a Federal Reserve rate hike this week, while a stronger dollar and surging oil prices added further pressure on the metal. Markets are now pricing roughly an 88% probability of a September hike.
Gold retreats as inflation data surprises
Gold prices fell on Monday after hotter-than-expected US inflation data increased expectations that the Federal Reserve will raise interest rates later this week. A stronger dollar and surging oil prices added to the pressure on bullion.
By 10:00 ET (14:00 GMT), spot gold had slipped 1.8% to $4,271.44 an ounce, while gold futures had dropped 2.2% to $4,311.15 an ounce. The move followed August inflation data, which showed firmer-than-anticipated underlying price gains.
Rate-hike odds climb to 88%
The firmer inflation print added to expectations that the Fed could deliver its first rate hike in three years at this week's meeting. Markets are now pricing roughly an 88% probability of a September rate hike. Higher borrowing costs typically weigh on gold because the metal generates no interest, making yield-producing assets more attractive.
A rate increase could also create political tension for the Fed. President Donald Trump reiterated his calls for lower interest rates on Sunday, continuing his recent criticism of the central bank's policy stance.
Oil and Middle East tensions complicate the outlook
At the same time, the inflation outlook is being complicated by the Middle East conflict. Benchmark Brent crude climbed above $108 a barrel after rising almost 9% last week, as the conflict continued to disrupt energy markets.
A meeting planned for Monday between Iran and several Gulf nations to establish a temporary shipping lane through the Strait of Hormuz was postponed, leaving efforts to increase shipments through the critical waterway uncertain.
Gold has traded in a relatively narrow range around $4,400 since rebounding from a floor near $4,000 in July, as investors repeatedly reassessed the outlook for Fed policy. ANZ forecasts three 25-basis-point Fed rate hikes by March 2027 as it expects escalating Middle East tensions and higher energy prices to drive inflation higher. However, ANZ said those inflation pressures are being driven by geopolitical disruptions, which it believes should preserve gold's safe-haven appeal.
Source: Commodities & Futures News
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