Gold prices are holding losses, trading around $4,290 an ounce, after falling over 1% in the previous session to a five-week low. This decline is largely attributed to increasing disruptions in oil flows from the Middle East, which are stoking fears of higher energy prices and inflation.
The prospect of elevated energy costs has put significant pressure on the Federal Reserve to implement its first interest rate increase in three years. Market traders are currently pricing in a 92% probability of a rate hike occurring when the central bank meets in the coming days. Higher borrowing costs typically diminish the appeal of gold, as it is a non-interest-bearing asset.
This sentiment is echoed by other market analysts. Tim Waterer, chief market analyst at KCM Trade, noted that gold is not finding favorable conditions due to rising energy prices and increasing rate expectations ahead of Federal Reserve and Bank of Japan meetings, creating a yield headwind for the precious metal. Similarly, Jim Wyckoff, a market analyst at American Gold Exchange, stated that sharply higher crude oil prices are driving inflation expectations, suggesting major central banks will need to tighten monetary policies, which is bearish for metals.
