Gold prices fell on Tuesday, August 18, due to rising oil prices and increasing U.S. Treasury yields. Spot gold dropped 0.5% to $4,391.14 per ounce. U.S. gold futures for December delivery fell 0.6% to $4,446.70, according to data from Business Times.
Rising Oil Prices
Oil prices surged after Iran announced a shift to a "fully offensive" military stance amid stalled talks with the U.S. over a ceasefire. Brent crude traded above $91 per barrel, raising concerns about possible disruptions in energy supplies through the Strait of Hormuz. Analysts noted that this geopolitical tension has kept oil prices high, which could extend inflationary pressures.
Market Expectations
Market sentiment is changing as traders await the U.S. Federal Reserve's minutes from its July policy meeting, set for release on Wednesday. Analysts believe that high energy prices may lead to expectations for higher interest rates. Gold is often viewed as a hedge against inflation, but rising interest rates usually reduce its appeal as a non-yielding asset. According to Livemint, MCX gold October futures were down 0.55% at ₹1,55,090 per 10 grams in early trading, reflecting similar trends in the global market.
Gold and silver prices are likely to stay under pressure as rising oil prices raise fears of interest rate hikes by the Federal Reserve and other central banks. Investors will closely watch the upcoming Fed minutes for insights into future monetary policy. This is especially important ahead of the July Personal Consumption Expenditures (PCE) price index due on August 26, which is key for understanding inflation trends.
Related coverage: Gold Prices Surge as Wall Street Remains Muted Amid Tensions, Gold Nears $4,400 as Weak Retail Data Eases Rate Hike Fears.
Based on reporting by: businesstimes.com.sg, livemint.com