Gold dips as oil surge above $90 stokes rate hike fears
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Spot gold fell 0.1% to $4,014.53 an ounce on Monday as Brent crude topped $90 for the first time in months, driven by escalating Middle East conflict. The oil rally fueled inflation concerns and strengthened expectations that the Federal Reserve may raise interest rates again. Gold, despite its safe-haven status, typically faces pressure in a high-rate environment as it yields no income.
Oil Rally and Rate Expectations
Brent crude surged about 3% to exceed $90 a barrel after the U.S. completed a ninth consecutive night of strikes on Iran and confirmed the deaths of two American soldiers in Jordan. The oil price jump heightened fears of supply disruptions through the Strait of Hormuz and reinforced inflation concerns. According to the CME FedWatch tool, the probability of a Fed rate hike in December rose to 82% from 73% a week earlier.
Gold Price Pressure
Spot gold edged down 0.1% to $4,014.53 an ounce, while U.S. gold futures held near $4,019.80. Senior market analyst Kelvin Wong at OANDA noted that escalating conflict raises stagflation risks, increasing the opportunity cost of holding gold. He warned that if prices settle below $3,886, the next support could be $3,500 an ounce.
Other Metals and Fed Signals
Silver rose 1.9% to $56.95 an ounce, platinum added 0.5% to $1,599.97, while palladium slipped 0.2% to $1,244.50. Cleveland Fed President Beth Hammack said further rate increases remain possible if inflation stays elevated, adding to pressure on non-yielding assets.
What's Next
Markets will watch for further U.S. military actions and any diplomatic moves in the Middle East that could ease supply fears. It remains unclear whether gold can hold above $4,000 if the Fed signals another rate hike.
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Gold dips as oil surge above $90 stokes rate hike fears
