Gold falls to one-week low on rising oil prices and hawkish Fed expectations

Gold prices fell back to a one-week low on Thursday (24th). (Reuters photo)

[Financial Channel/Comprehensive Report] Due to rising oil prices and changes in the Federal Reserve's hawkish statements, the market expects that policy interest rates will continue to rise. Gold prices fell back to a one-week low on Thursday (24th). Gold futures for December delivery closed down 0.5% to US$4,298; spot prices fell 0.5% to US$4,265.50 per ounce, hitting the lowest level since September 16.

David Meger, head of metals trading at High Ridge Futures, said that gold prices continue to be under dual pressure from rising energy prices and rising interest rates. As energy prices rise, people's expectations for inflation concerns intensify, and the possibility of further interest rate hikes by the Federal Reserve also increases.

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Rising energy prices will push up overall inflation as manufacturers pass on higher costs to consumers, which could force the central bank to adopt a stricter policy stance to curb prices. The Federal Reserve raised interest rates after last week's policy meeting, tightening policy for the first time in more than three years, and signaled the possibility of further rate hikes this year.

The market currently sees a 69% chance of a rate hike in October, and while gold is a traditional inflation hedge, rising interest rates have weakened its appeal. A stronger dollar also weighed on gold prices, with the dollar hitting a two-month high, making dollar-denominated gold more expensive for overseas buyers. Meanwhile, 10-year bond yields are hovering at their highest in nearly 20 years, increasing the opportunity cost of holding the metal.

Ole Hansen, head of commodity strategy at Saxo Bank, said that gold's recent support near $4,235 is the primary focus. A fall below this level may trigger a deeper correction in the market and may refocus the market on the area near $4,000 between June and July.

In terms of other precious metals, spot silver fell 1.3% to US$63.60 per ounce; palladium rose 0.7% to US$1,268.24 per ounce; platinum fell 0.1% to US$1,748.46 per ounce.

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