Gold stays under pressure as surging oil strengthens Fed rate-hike bets

GOLD held a decline, as the latest US inflation report and surging oil prices bolstered the case for the US Federal Reserve to hike interest rates at its Sep 15-16 meeting.

Bullion was little changed near US$4,320 an ounce, after dropping 1.8 per cent in the previous session to the lowest since early August. The US producer price index rose 0.4 per cent in August, the most since May, according to data released on Thursday (Sep 10). That reflected growing pressure from higher energy prices as fighting escalates in the Middle East.

Benchmark Brent crude pushed higher, close to US$108 a barrel, with Iran and US digging in for a protracted war. Hostilities have intensified in recent weeks, with the US striking Iranian oil tankers, the Islamic Republic firing missiles at a Jordanian airbase and Teheran-backed Houthis in Yemen attacking Saudi Arabian infrastructure.

Bond yields also surged after lower-than-expected purchases by the US Treasury Department during its first expanded buyback operation. That raised doubts about the effectiveness of US Treasury Secretary Scott Bessent’s unusual intervention aimed at stabilising the market and curbing the jump in long-term yields. Gold – which does not pay interest – tends to perform worse when yields are high.

Investors will now be keeping tabs on the US consumer price index due later on Friday for further clues to US Fed policy ahead of the central bank’s Sep 15-16 meeting. Swaps traders are currently pricing in a roughly 70 per cent chance of a rate hike.

Spot gold was little changed at US$4,318.48 an ounce at 7.25 am in Singapore. Silver slipped 0.1 per cent to US$63.58 an ounce, after dropping 5.5 per cent on Thursday – the most since June. Platinum and palladium were steady. The Bloomberg Dollar Spot Index, a gauge of the US currency, was flat, after rising 0.3 per cent in the previous session. BLOOMBERG