Gold prices fell more than 1% on Monday as oil prices climbed and concerns over inflation increased, strengthening expectations that the US Federal Reserve could raise interest rates again.
By 01:17 GMT, spot gold was down 1.5% at $4,223.95 per ounce, while US gold futures fell 1.5% to $4,257.90.
Tim Waterer, chief market analyst at KCM Trade, said rising bond yields alongside higher oil prices were putting pressure on gold, adding that rising oil prices were keeping inflation at the forefront of investors’ concerns.
Oil prices rose more than 1% on Monday amid mixed signals over oil flows. Iran continues to insist that diplomacy is the way to resolve its dispute with the United States and Israel, after US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and halt the fighting.
The Federal Reserve raised interest rates by 25 basis points earlier this month, bringing the target range to 3.75%-4%.
According to CME Group’s FedWatch tool, traders are pricing in a 66% probability of another US rate hike in October.
Higher energy prices increase costs across various sectors of the economy, potentially fueling inflation. Although gold is widely viewed as a hedge against inflation, higher interest rates increase the cost of holding the non-yielding asset.
Investors are awaiting several US labor-market and inflation reports this week, including job openings, ADP employment data, the Personal Consumption Expenditures (PCE) price index and nonfarm payrolls.
Waterer said stronger-than-expected inflation or employment data could keep upward pressure on bond yields and further weigh on gold prices.
Among other precious metals, spot silver fell 2.6% to $62.64 an ounce, platinum declined 2.1% to $1,741.45, and palladium dropped 2.1% to $1,239.95.
