Gold Prices Drop as Houthi Attacks Spike Oil Costs
Gold prices fell toward $4,160 per ounce as Houthi attacks on Saudi Arabia increased energy costs and strengthened the case for U.S. interest rate hikes.
Gold prices declined toward $4,160 per ounce on Tuesday, continuing a downward trend that has seen the metal fall approximately 20% since the outbreak of the U.S.-Iran war in late February. The decline follows attacks by Iran-backed Houthi forces on the main airport in Saudi Arabia, which pushed Brent crude prices toward $106 per barrel.
The Federal Reserve System is weighing these geopolitical tensions, as escalating conflict in the Middle East increases concerns over energy supply disruptions and persistent inflation. These factors strengthen the case for tighter monetary policy, which reduces the appeal of non-yielding assets like gold by increasing borrowing costs.
Market participants are now awaiting U.S. consumer price index data due Wednesday to determine the central bank's next move. While interest-rate swaps indicate a 20% probability of a rate hike at the October meeting, Beth Hammack, President of the Federal Reserve Bank of Cleveland, suggested that smaller and more frequent policy adjustments could anchor inflation expectations, though she did not explicitly endorse an October increase.
