Gold softens on prospects of Fed rate hikes as Brent tops $100
- Spot gold eased 0.5% to $4,027.54 per ounce
Gold prices extended losses as Brent crude surged above $100 a barrel, fueling inflation concerns and strengthening the case for higher interest rates ahead of the Federal Reserve meeting.
- Rising oil prices and inflation concerns.
- Upcoming Federal Reserve policy meeting.
- Gold's appeal in high-interest-rate environments.
Gold extended losses on Friday after falling 2% in the previous session, as Brent crude’s move back above $100 a barrel stoked inflation concerns and strengthened the case for higher interest rates ahead of a Federal Reserve policy meeting next week.
Spot gold eased 0.5% to $4,027.54 per ounce by 0523 GMT, with prices down more than $130 from a two-week high hit on Wednesday.
US gold futures for August delivery were 0.5% lower at $4,029.60. Bullion was still on track for a small weekly gain of 0.3% though. “In the short term, we expect more volatility… gold has been trading between $3,980 all the way to about $4,170 and has been stuck in this way for weeks.
Every time prices hit close to $4,000 or slightly below, we see that there will be big buyers coming to buy it back up,“ said GoldSilver Central Managing Director Brian Lan.
US President Donald Trump promised on Thursday “major military punishment” for Iran and its Houthi allies, after the Yemeni fighters struck two Saudi oil tankers in the Red Sea.
Brent crude surged 7% on Thursday, breaking through $100 a barrel for the first time since May in one of the steepest run-ups since the war began. Elevated crude oil prices stir market concerns around inflation and the potential for higher-for-longer interest rates.
While gold is traditionally seen as a hedge against inflation, its appeal as a non-yielding asset reduces in a high-interest-rate environment.
Investors are also focused on next week’s US Federal Reserve meeting, where policymakers are widely expected to keep rates unchanged.
Traders are pricing in about an 81% chance of a hike in September, according to the CME FedWatch Tool.
The European Central Bankheld interest rates as expected on Thursday but kept the door open for another increase in September.
Spot silver was down 0.4% at $57.48 per ounce, though still headed for a weekly gain of 3%. Platinum fell 0.9% to $1,585.50 and palladium dropped 1.5% to $1,238.55, both on track for a weekly drop.
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