Gold slipped toward $4,330 an ounce on Monday after hotter-than-expected August inflation data lifted bets on a Federal Reserve rate hike this week. A stronger dollar and surging oil prices added further pressure on bullion, even as ANZ held its longer-term bullish outlook on the metal.
Gold fell on Monday after hotter-than-expected US inflation data raised expectations that the Federal Reserve will raise interest rates later this week, while a stronger dollar and surging oil prices added to the pressure on bullion. The metal was trading around $4,330 an ounce after falling for a third straight week.
Bullion dropped 1.8% last week despite ending Friday's session higher. XAU/USD fell 0.4% to $4,331.84 an ounce, while Gold Futures declined 0.8% to $4,371.65. The US Dollar Index rose 0.3% to 99.42, adding to the pressure on the metal.
Hot inflation lifts Fed hike bets
August inflation data showed the core consumer price index rose 0.3% month on month, excluding food and energy costs. The increase added to expectations that the Fed could deliver its first rate hike in three years at this week's meeting.
Markets are now pricing roughly an 88% probability of a September rate increase. Higher borrowing costs typically weigh on gold because the metal generates no interest, making yield-producing assets more attractive. President Donald Trump reiterated his calls for lower interest rates on Sunday, continuing his recent criticism of the central bank's policy stance.
Middle East tensions stoke oil prices
The inflation outlook is also being complicated by the Middle East conflict. Brent crude climbed toward $107 a barrel after rising almost 9% last week, as the conflict continued to disrupt energy markets. A meeting planned for Monday between Iran and several Gulf nations to establish a temporary shipping lane through the Strait of Hormuz was postponed, leaving efforts to increase shipments through the critical waterway uncertain.
ANZ sees longer-term support despite rate risks
Gold has traded in a relatively narrow range around $4,400 since rebounding from a floor near $4,000 in July, as investors repeatedly reassessed the Fed policy outlook. ANZ said it remains constructive on gold despite expectations for further monetary tightening.
The bank expects escalating Middle East tensions and higher energy prices to drive inflation higher and forecasts three 25 basis point Fed rate hikes by March 2027. However, ANZ said those inflation pressures stem from geopolitical disruptions, which it believes should preserve gold's safe haven appeal, and it maintained its 12-month gold price target at $5,400 an ounce.
Investment demand is providing another source of support. ANZ said gold ETF holdings and speculative positions have recovered in recent months, while strong institutional demand in China and increasing investor participation in India are also supporting the market.
Source: Commodities & Futures News
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