BANGALORE – Gold lost 4% on Sept 28 to trade at a more than seven-week low, as rising oil prices stoked inflation concerns and bolstered bets on tighter monetary policy, while a higher dollar and Treasury yields created further headwinds for the metal.
Spot gold was down 3.8% at US$4,121.58 per ounce as of 12.02am, after falling as much as US$4,110.55, its lowest since Aug 5. US gold futures fell 3.9% to US$4,153.70.
“We’ve got crude oil prices sharply higher. And that suggests still more problematic price inflation, which suggests a tighter Federal Reserve monetary policy,” said Jim Wyckoff, a market analyst at American Gold Exchange.
Higher Treasury yields and the US dollar at multi-week highs were all “creating a perfect storm to push the metals prices sharply lower,” Wyckoff said.
The dollar was steady near a two-month high, making greenback-priced bullion more expensive for overseas buyers, while US Treasury yields extended gains, raising the opportunity cost of holding non-yielding gold.
Oil rose about 3% after US President Donald Trump rejected a peace deal from Iran to resolve their conflict and reopen the Strait of Hormuz. Higher oil prices can feed into inflation, forcing central banks to adopt a higher-for-longer rate stance.
Although gold is traditionally considered an inflation hedge, higher rates dent its appeal as investors prefer yield-bearing assets.
Traders see about a 94% chance of one rate hike in December, CME’s FedWatch Tool showed.
The Fed lifted benchmark rates by a quarter percentage point earlier in September and flagged that more hikes are likely in the coming months.
Echoing the Fed’s hawkish stance, several policymakers have warned that inflation risks remain elevated and that interest rates may need to rise further, with Cleveland Fed President Beth Hammack among the latest officials to reiterate that view.
Markets now turn their focus to job openings, the ADP employment report, Personal Consumption Expenditures readings and nonfarm payrolls, all due this week.
Among other metals, spot silver fell 5% to US$4,153.70 per ounce, platinum declined 3.6% to US$1,714.04, and palladium lost 4.1% to US$1,215.25. REUTERS
