Gold prices edged lower on Monday, pressured by a jump in crude oil that reignited inflation concerns. The move comes as markets price in an 86% chance that the US Federal Reserve will raise interest rates, a scenario that typically dims the appeal of the non-yielding precious metal. The decline also pulled other precious metals into negative territory for the session.
What moved gold
The primary trigger was a surge in oil prices. Higher energy costs feed into broader consumer prices, and traders responded by increasing their bets on tighter monetary policy. August consumer price data already showed a notable acceleration, strengthening the case for rate action. When the Fed raises rates, the opportunity cost of holding gold—which pays no interest—rises, making the metal less attractive relative to yield-bearing assets.
Rate expectations
According to market pricing, there is now an 86% probability of a US interest rate hike at the next policy meeting. This near-certain expectation has been reinforced by the recent inflation figures and has weighed on gold throughout the session. The metal has been sensitive to interest rate expectations all year, and Monday's move was consistent with that pattern.
Other precious metals followed gold lower on Monday, reflecting a broad risk-off tone in the commodities complex. Silver, platinum and palladium all recorded losses as the dollar strengthened on the prospect of higher rates.
Key takeaways
- Gold slipped as surging oil prices stoked inflation fears and strengthened the case for a US rate hike.
- Market pricing now assigns an 86% probability to a rate increase at the next Federal Reserve meeting.
- Rising interest rates reduce gold's appeal by increasing the opportunity cost of holding the non-yielding metal.
- The sell-off extended to other precious metals, with silver, platinum and palladium also declining on Monday.
For readers tracking the metal's movements, the live gold price page provides real-time updates.