Gold held a decline, trading around $4,290 an ounce, after falling more than 1% in the previous session to a five-week low. This downturn is attributed to increasing disruptions to oil flows from the Middle East, which have reinforced expectations that the Federal Reserve will raise interest rates as early as this week. The prospect of higher energy prices fueling inflation is putting pressure on the Fed to implement its first rate increase in three years.
Traders are now pricing in a 92% chance of a rate hike occurring when the central bank meets in the coming days. Higher borrowing costs are generally seen as negative for gold, as the precious metal does not offer interest. This sentiment contributes to the current downward pressure on gold prices.
The 10-year Treasury yield briefly touched 5% for the first time in nearly three years, further impacting non-yielding bullion. Gold has declined more than 3% in September, after trading above $4,600 an ounce in late August, as market participants continuously adjust their outlook for Fed policy. Spot gold was down 0.3% to $4,288.18 an ounce, and silver was down 0.2% at $63.11 an ounce, following a 2% decline the previous day.
