Gold Prices Drop as Oil Spikes and Rate Hike Fears Grow

Gold prices declined more than 1% on Monday, with spot gold dropping to between $4,198.10 and $4,223.95 per ounce. The downturn follows a recent interest-rate hike by the Federal Reserve System, which raised the target range to 3.75%–4%. Traders currently price in a 68% chance of another rate increase in October.

Rising oil prices, driven by geopolitical tensions, have heightened inflation concerns and increased the opportunity cost of holding non-yielding assets like gold. These tensions include President Donald Trump's rejection of an Iranian proposal to reopen the Strait of Hormuz. Other precious metals, including silver, platinum, and palladium, also experienced price declines.

Beth Hammack, President of the Cleveland Fed, warned that persistently high inflation risks conditioning the American public to accept elevated prices as the norm. Investors are now awaiting U.S. labor market data and the Personal Consumption Expenditures price index to determine the central bank's next moves.