Gold prices saw a significant decline on Monday, falling over 1% and reaching their lowest point in more than seven weeks. This downturn was primarily driven by a surge in oil prices, which intensified inflation concerns and bolstered expectations that the Federal Reserve would implement additional interest rate hikes.
Spot gold was down 1.5% at $4,223.95 per ounce, while U.S. gold futures fell 1.5% to $4,257.90. Other precious metals also experienced declines, with spot silver falling 2.6% to $62.64 per ounce, platinum down 2.1% at $1,741.45, and palladium losing 2.1% to $1,239.95.
The rise in oil prices was attributed to the ongoing impasse in the Strait of Hormuz, after U.S. President Donald Trump rejected an Iranian proposal to reopen the waterway. This geopolitical tension is contributing to higher energy costs, which in turn fuel inflation. Analysts noted that the combination of high bond yields and rising oil prices is acting as a significant deterrent for gold. The Federal Reserve had already raised rates by a quarter percentage point earlier this month, and traders are now pricing in a 66% chance of another U.S. rate hike in October, according to CME's FedWatch Tool.
Investors are closely monitoring upcoming U.S. economic data, including job openings, the ADP employment report, the Personal Consumption Expenditures (PCE) price index, and nonfarm payrolls. Stronger-than-expected inflation or employment figures could further pressure bond yields and negatively impact gold prices. Cleveland Fed President Beth Hammack expressed concern that persistent high inflation could lead the public to accept elevated prices as the norm, emphasizing the central bank's commitment to preventing this.
