TLDR
- Gold fell around 0.4% to $4,331 after hotter-than-expected U.S. inflation data
- Markets now price an 88% chance of a Fed rate hike this week
- Brent crude climbed toward $107 a barrel, adding pressure on gold
- ANZ maintains a 12-month gold price target of $5,400 an ounce
- UBS says investors may be looking past the next Fed move toward year-end gains
Gold prices dropped on Monday after U.S. inflation came in hotter than expected, raising the chances that the Federal Reserve will hike interest rates this week.
Gold was trading around $4,331 an ounce, falling 0.4% on the day. Gold Futures also declined 0.8% to $4,371.65. The metal has now fallen for three straight weeks, losing 1.8% last week alone.
The U.S. Dollar Index rose 0.3% to 99.42, adding more pressure on gold. A stronger dollar tends to make gold more expensive for buyers using other currencies.
Silver also slipped, with spot silver falling 1.0% to $63.88 an ounce. Platinum edged up 0.2% to $1,802.94.
Inflation Data Fuels Rate Hike Expectations
The core consumer price index rose 0.3% month on month in August, excluding food and energy. That reading pushed markets to price in roughly an 88% probability of a rate increase at this week’s Fed meeting.
Higher interest rates are bad for gold because the metal pays no interest. When rates rise, yield-producing assets become more attractive to investors.
President Donald Trump repeated his calls for lower rates on Sunday, putting political pressure on the Fed ahead of its decision.
The inflation picture is also being complicated by rising oil prices. Brent crude climbed toward $107 a barrel after gaining nearly 9% last week. Tensions in the Middle East are disrupting energy markets.
A planned meeting between Iran and Gulf nations to set up a temporary shipping lane through the Strait of Hormuz was postponed Monday, leaving energy supply routes uncertain.
Analysts Still See Gold Recovering by Year-End
Despite the short-term pressure, some analysts remain positive on gold over the longer term.
ANZ said it stays constructive on gold even as more rate hikes are expected. The bank forecasts three more 25 basis point hikes by March 2027. It kept its 12-month gold price target at $5,400 an ounce.
ANZ said the inflation being driven by geopolitical tensions should preserve gold’s appeal as a safe haven asset.
Gold ETF holdings and speculative positions have recovered in recent months. Institutional demand in China remains strong and investor interest in India is growing.
UBS strategist Joni Teves said gold investors may already be looking past the Fed’s next move. She noted that rate hike expectations may already be priced in, with buyers now focused on gold’s diversification appeal and ongoing central bank buying.
Teves added that peak demand season is approaching in India. She said gold is likely to remain volatile but is increasingly likely to rise toward the end of the year.
She did flag that a September rate hike could trigger a short-term correction, though she does not expect it to derail the broader recovery.
Spot gold was last down 0.3% at $4,332.84 an ounce.
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