Gold slips as oil rally fans rate hike bets ahead of Fed meeting
Dips should still draw buyers looking for an uncertainty hedge, says a market analyst at KCM Trade
[BENGALURU] Gold prices eased on Monday (Sep 14) as a surge in oil prices fuelled inflation concerns, boosting expectations that the US Federal Reserve may raise interest rates at its policy meeting this week.
Spot gold was down 0.6 per cent at US$4,321.26 per ounce by 0724 GMT, after posting a third consecutive weekly decline on Friday. US gold futures dropped 1.1 per cent to US$4,361.20.
“Gold isn’t finding conditions to its liking. Rising energy prices plus climbing rate expectations ahead of the Fed and Bank of Japan (BOJ) meetings are delivering a clear yield headwind for gold,” said Tim Waterer, chief market analyst at KCM Trade.
“In the meantime, dips should still find buyers as an uncertainty hedge while geopolitics and rate policy remain fluid.”
Reinforcing expectations that the Fed will raise interest rates, data last week showed US consumer prices accelerated in August, while a key measure of underlying inflation posted its largest increase in four months.
Traders are pricing in about an 87 per cent chance of a rate hike at the central bank’s policy meeting on Tuesday and Wednesday, up from about 67 per cent prior to the inflation data last week, according to the CME FedWatch Tool.
The BOJ is also expected to raise rates on Friday, as persistent inflation and resilient economic growth have raised the prospect of further rate hikes by major central banks, amid rising energy prices and little sign of easing Middle East tensions.
Although gold is typically seen as an inflation hedge, higher interest rates tend to reduce the appeal of non-yielding bullion.
Oil prices jumped more than 2 per cent on Monday after fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf compounded supply concerns following the closure of a key Saudi oil pipeline.
Middle East diplomacy appeared to falter after a meeting between Iran and other Gulf states was postponed.
Among other metals, spot silver slid 1.3 per cent to US$63.63 per ounce, platinum dipped 0.4 per cent to US$1,789.35, and palladium also fell 0.4 per cent to US$1,293.46. REUTERS
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