Gold drops over 1% as oil rally reinforces higher-for-longer rate outlook
Gold prices fell over 1% as rising oil prices fueled inflation concerns and expectations of sustained high interest rates. Investors are now closely watching upcoming Federal Reserve meetings and PCE data for further policy direction.
Why it matters
Gold is often seen as a hedge against inflation, but high interest rates increase the opportunity cost of holding non-yielding assets, impacting global investment portfolios.
Gold fell more than 1% on Thursday as rising oil prices stoked inflation concerns and reinforced expectations that interest rates could stay higher for longer, while investors awaited next week's Federal Reserve meeting for clues on the policy outlook.
Spot gold slid 1.1% to $4,094.90 per ounce by 0333 GMT, hitting its lowest since October 14. US gold futures for December delivery dropped 0.9% to $4,111.40.
If oil prices continue to rise, inflation expectations could increase, raising the likelihood of higher interest rates over the longer term and weighing on gold, said Kelvin Wong, a senior market analyst at OANDA.
Oil prices rose on Thursday as more attacks by the Houthis in Saudi Arabia prompted the US to order some diplomats and family members to leave its missions in the Kingdom.
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