Gold prices kicked off the trading week with a steep drop, as climbing oil costs heightened inflation concerns and strengthened expectations for a tighter US Federal Reserve interest rate path. In early Monday transactions, selling pressure dominated the gold market, with an ounce of the precious metal sliding to $4,170, a loss of 2.6% as of 0640GMT.
Oil rally fuels inflation and rate worries
Crude prices advanced after reports that US President Donald Trump turned down an offer to reopen the Strait of Hormuz and bring an end to the conflicts. Brent futures changed hands at $107 per barrel, up 2.6%, while WTI stood at $94, up 1.5%. Expectations that elevated energy costs could keep inflationary pressures high by raising production and consumption expenses weighed on gold, alongside high US bond yields. Trump rejected a seven-day cease-fire proposal conveyed by Iran through mediators to open the Strait of Hormuz to shipping traffic, stating that Iran’s offer was unacceptable.
Investors eye Fed’s next moves after rate hike
Market participants shifted their attention to the interest rate trajectory for upcoming meetings after the Fed raised its policy rate by 25 basis points to the 3.75% to 4% range at this month’s gathering.