Key Moments
- Spot gold fell 1.2% to $4,295.80 an ounce, while futures declined 1.7% to $4,334.97 an ounce by 07:01 ET (11:01 GMT).
- August U.S. inflation data came in hotter than expected, lifting market-implied odds of a September Federal Reserve rate hike to about 88%.
- ANZ projected three 25-basis-point Fed rate increases by March 2027, driven by Middle East tensions and rising energy prices, while maintaining gold’s safe haven appeal.
Gold Slides on Inflation Data and Stronger Dollar
Gold prices moved lower on Monday after U.S. inflation data for August showed stronger-than-expected underlying price growth, prompting investors to raise bets that the Federal Reserve will increase interest rates later this week. A firmer U.S. dollar and sharply higher oil prices added further headwinds for the precious metal.
By 07:01 ET (11:01 GMT), spot gold had declined 1.2% to $4,295.80 an ounce, while gold futures were down 1.7% at $4,334.97 an ounce.
| Instrument | Price (USD/oz) | Move | Time |
|---|---|---|---|
| Spot gold | $4,295.80 | -1.2% | 07:01 ET (11:01 GMT) |
| Gold futures | $4,334.97 | -1.7% | 07:01 ET (11:01 GMT) |
Fed Rate Hike Bets Intensify After August Inflation
The latest move in gold followed the release of August inflation figures, which pointed to firmer underlying price pressures than markets had anticipated. The data reinforced expectations that the Fed could deliver its first interest rate increase in three years at its meeting later this week.
Market pricing reflected an approximately 88% chance of a rate hike in September. Higher borrowing costs tend to be unfavorable for gold, since the metal does not pay interest and can look less attractive compared with yield-bearing assets when rates rise.
Political Pressure on the Fed
A potential rate increase also risked amplifying political scrutiny of the central bank. President Donald Trump reiterated his preference for lower interest rates on Sunday, extending his recent criticism of the Fed’s policy approach.
Middle East Conflict Fuels Oil Rally and Inflation Concerns
The inflation outlook has been further complicated by ongoing conflict in the Middle East, which has disrupted energy markets and driven oil prices higher. Benchmark Brent crude traded above $108 a barrel after gaining almost 9% over the previous week.
A scheduled meeting on Monday between Iran and several Gulf nations aimed at setting up a temporary shipping corridor through the Strait of Hormuz was postponed, leaving plans to boost traffic through the key chokepoint unresolved.
Gold Trades in Range as Investors Weigh Fed Path
Gold has been oscillating in a relatively tight band around $4,400 an ounce since rebounding from a low near $4,000 in July, as market participants continually reassessed expectations for Fed policy.
ANZ said it expects escalating tensions in the Middle East and higher energy prices to push inflation higher and projected three 25-basis point Fed rate hikes by March 2027. At the same time, ANZ noted that these inflationary forces are being driven by geopolitical disruptions, which it believes should help maintain gold’s role as a safe haven.
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