Gold Drops to 7-Week Low as Rising Oil Prices Spark Fears of Higher Int Rates
Gold prices plunged 3% to their lowest level in nearly two months after rising crude oil prices sparked renewed inflation worries, making investors bet that the US Federal Reserve will raise interest rates again.
Updated
Why Is Gold Falling?
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Costlier Oil Fuels Inflation: Crude oil prices bounced higher after US President Donald Trump rejected a peace proposal from Iran regarding the Strait of Hormuz. Because oil powers factories, trucks, and cargo ships, expensive fuel makes everyday goods more expensive, driving overall inflation back up.
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The Fed May Hike Rates: When inflation threatens to get out of control, central banks raise interest rates to slow the economy down. Traders now see a roughly 70% chance that the US Federal Reserve will raise rates again in October, following an increase earlier this month. Cleveland Fed chief Beth Hammack noted that policymakers cannot allow high prices to become the new normal.
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Gold Pays No Interest: Unlike bank deposits or government bonds, owning physical gold does not pay regular interest or dividends. When interest rates rise, investors can earn safe, attractive yields on cash and bonds. This makes holding gold less appealing, leading big traders to sell off bullion.
Key Technical Levels
Immediate Support 1 ($4,060 - $4,070): The primary buffer below today's low of $4,140.80 aligns with the consolidation shelf formed in early August prior to the previous breakout rally.
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