Gold extended declines on Monday, hitting its lowest in nearly two weeks after U.S. Federal Reserve Chair Kevin Warsh signalled that interest rate hikes may be needed to contain inflation.
Chalinee Thirasupa | Bloomberg | Getty Images
Gold fell on Monday, hovering near a two-week low, as investors assessed growing expectations of a Federal Reserve rate hike following hawkish comments from Chairman Kevin Warsh as a surge in oil prices further added to inflation concerns.
Spot gold fell 0.5% to $4,431.39 an ounce, having touched its lowest level since mid-August earlier. Still, the metal remained set for its strongest monthly performance since January, with prices up 9.6% so far.
U.S. gold futures for December delivery dropped 1% to $4,482.60.
“The biggest reason right now is higher interest rates, higher inflation expectations, driven by energies and drawdown of oil inventories,” said Daniel Pavilonis, senior market strategist at Stone X.
“And then the U.S. yields are continuing to strengthen, the dollar is continuing to strengthen. I think that puts gold in a precarious position,” the strategist added.
Crude prices rose more than 3% on Monday after the United States struck an Iranian island in the Strait of Hormuz and Tehran said it had responded, escalating a conflict that has now entered its seventh month.
While the U.S. dollar remained near a roughly two-week high, a slight pullback in the currency helped limit further declines in gold.
Gold tumbled more than 3% on Friday, its sharpest daily decline since June 10, after Federal Reserve Chair Kevin Warsh signaled at the Jackson Hole symposium that policymakers may need to do more if inflation does not move back toward the central bank’s 2% target.
Traders have raised bets on a September rate hike to about 64%, from about 36% before Warsh’s comments, according to the CME FedWatch tool.
Markets now await the U.S. ADP employment report and August nonfarm payrolls data due later this week for more clues on the economy and interest rates.
Elsewhere, spot silver fell 0.4% to $66.1351 per ounce, and is up about 15% this month after hitting its highest since mid-June on Friday.
Platinum slipped 1.8% to $1,787.63, and palladium slid nearly 4% to $1,365.09. Both metals were headed for their biggest monthly rise since December.
