Soaring oil prices intensify inflation concerns, gold falls short-term, but long-term prospects remain promising

Gold prices fell on Tuesday (8th). (Bloomberg file photo)

[Financial Channel/Comprehensive Report] The price of gold fell on Tuesday (8th) as soaring oil prices intensified market concerns about inflation and raised expectations that the Federal Reserve (Fed) will raise interest rates as soon as this month. However, despite the short-term pressure on interest rates, Jeff Currie, former head of commodity research at Goldman Sachs and a senior commodity expert, has recently remained optimistic about the long-term prospects of gold. He believes that under the global de-dollarization, rising sovereign debt pressure and re-pricing of hard assets, the market's hotly discussed US$10,000 per ounce still has huge room for imagination.

Spot gold fell 0.4% to $4,385.09 an ounce.

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Gold futures for December delivery fell 1% to $4,430.10 an ounce.

According to Reuters, Daniel Pavilonis, senior market strategist at StoneX, said: "Gold prices are currently range-bound, as the increased probability of interest rate hikes creates pressure and continues to suppress market momentum."

The Yemen youth movement backed by Iran attacked Saudi energy facilities, and Tehran threatened that the United States would launch an "economic war", pushing up oil prices. Brent crude oil once approached US$100 per barrel, reaching a maximum of US$99.46, a new high since July 24, exacerbating market concerns about inflation.

Peter Grant, vice president and senior metals strategist at Zaner Metals, said that the market continues to digest the better-than-expected U.S. employment report while waiting for the upcoming CPI and PPI data; rising oil prices have also heightened inflation concerns and supported market expectations for an interest rate hike in September.

The CME FedWatch tool shows traders are now betting on about a 60% chance of the central bank raising interest rates at the policy meeting, up from about 50% before the data was released.

However, although the short-term is suppressed by expectations of interest rate hikes, the market still has high expectations for gold's long-term prospects. "Benzinga" reported that Currie recently said that as U.S. debt interest payments continue to rise, the risk of financial repression intensifies, and global funds gradually shift to physical assets such as gold, energy and agricultural products, the current commodity super cycle dominated by hard assets may still be in its early stages.

Currie believes that the sovereign debt imbalances in Western countries are changing the traditional asset pricing logic. Although financial repression may help lower yield rates, it may ultimately bring greater inflationary pressure and further erode the real value of currencies and debt. In such an environment, the importance of physical assets such as gold will continue to increase.

He also pointed out that under the global de-dollarization trend, especially emerging market central banks are gradually reducing their reliance on U.S. dollar assets, gold is becoming an important alternative hard asset. Regarding the market's hot discussion that the price of gold may reach US$10,000 per ounce in the future, although Currie did not put forward a specific price target, he believed that if the proportion of gold in global foreign exchange reserves returns to the level before the United States stopped converting US dollars into gold in 1971, it still means that there is considerable room for gold prices to rise.

U.S. PPI will be released on Thursday, while CPI data is expected to be released on Friday.

Other precious metals trading

Spot silver rose 0.3% to $66.34 an ounce.

Spot platinum rose 0.8% to $1,843.99 an ounce.

Spot palladium fell 2.5% to $1,354.15 an ounce.

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