Gold prices moved lower on Monday after stronger-than-expected U.S. inflation data increased expectations that the Federal Reserve could raise interest rates later this week.
A firmer U.S. dollar and another surge in oil prices added further pressure on bullion.
Gold traded near $4,330 an ounce after posting a third consecutive weekly decline. The metal lost around 1.8% last week, despite ending Friday’s session in positive territory.
XAU/USD fell about 0.4% to $4,331.84 an ounce, while gold futures declined roughly 0.8% to $4,371.65.
Silver also weakened, with XAG/USD down around 1% to $63.88. Platinum, meanwhile, edged 0.2% higher to $1,802.94.
The U.S. Dollar Index gained approximately 0.3% to 99.42.
Hotter Inflation Raises Fed Rate Hike Expectations
Gold came under renewed pressure after the latest U.S. inflation data showed persistent price pressures.
Core consumer prices, which exclude food and energy, rose 0.3% month over month in August.
The stronger reading increased expectations that the Federal Reserve could deliver its first interest rate increase in three years at this week’s meeting.
Markets are now pricing in roughly an 88% probability of a September rate hike.
Higher interest rates are generally negative for gold because the precious metal does not generate interest income. As yields rise, interest-bearing assets such as government bonds can become more attractive to investors.
Stronger Dollar Adds Pressure on Gold
The stronger U.S. dollar also weighed on gold prices.
Because gold is priced in dollars, a rising greenback can make the metal more expensive for buyers using other currencies.
That relationship can reduce demand and create additional downward pressure on bullion.
Fed Decision Could Increase Political Tensions
A potential rate hike could also increase political pressure on the Federal Reserve.
President Donald Trump repeated his calls for lower interest rates on Sunday, continuing his criticism of the central bank’s monetary policy stance.
The latest inflation figures, however, could make it more difficult for policymakers to justify easing financial conditions.
Markets will therefore be watching both the Fed’s interest rate decision and its guidance on the future path of monetary policy.
Oil Surge Complicates the Inflation Outlook
The inflation picture has also become more complicated because of rising energy prices.
Brent crude moved toward $107 per barrel after gaining almost 9% last week.
Ongoing conflict in the Middle East has disrupted energy markets and raised concerns about global supply.
Higher oil prices can increase transportation and production costs, potentially keeping inflation elevated for longer.
That could force the Federal Reserve and other central banks to maintain tighter monetary policy.
Strait of Hormuz Talks Postponed
Geopolitical uncertainty increased further after a planned meeting between Iran and several Gulf countries was postponed.
The talks had been expected to focus on creating a temporary shipping route through the Strait of Hormuz.
The delay leaves uncertainty surrounding efforts to increase the movement of oil and other goods through one of the world’s most important energy corridors.
Any prolonged disruption in the Strait of Hormuz could keep oil prices elevated and add further pressure to the global inflation outlook.
ANZ Remains Positive on Gold Long Term
Despite the near-term pressure from higher interest rates, ANZ remains constructive on the longer-term outlook for gold.
Gold has traded within a relatively narrow range around $4,400 since recovering from levels near $4,000 in July.
Investors have repeatedly reassessed the outlook for Federal Reserve policy during this period.
ANZ expects geopolitical tensions and higher energy prices to keep inflation elevated.
The bank forecasts three 25-basis-point Federal Reserve rate hikes by March 2027.
Safe-Haven Demand Could Support Gold
ANZ believes the source of inflation is important for the gold outlook.
The bank argues that inflation driven by geopolitical disruptions could continue to support gold’s role as a safe-haven asset.
As a result, ANZ maintained its 12-month gold price target at $5,400 an ounce.
Geopolitical uncertainty, energy market disruptions and concerns over global financial stability could continue to attract investors toward bullion even if interest rates rise further.
Investment Demand Remains Supportive
Investment flows are also providing support for gold.
ANZ noted that gold ETF holdings and speculative positions have recovered in recent months.
Institutional demand from China also remains strong, while investor participation in India has increased.
These trends could help offset some of the pressure created by higher interest rates and a stronger dollar.
For now, gold remains caught between tighter monetary policy expectations and persistent safe-haven demand.
The Federal Reserve’s next decision, the direction of oil prices and developments in the Middle East are likely to determine whether gold can stabilize near current levels or face further downside.
