Gold Prices Fall as Bets on US Interest Rate Hike This Year Increase

Gold bars

Gold prices retreated in Friday trading, with Brent crude oil exceeding the $100 per barrel mark, raising fears of worsening inflationary pressures and supporting market bets on raising US interest rates during the current year.

This decline in gold prices comes in the context of energy market tensions and their impact on global inflation.

Investors are turning their attention to the Federal Reserve meeting next week, where widespread expectations prevail of keeping interest rates unchanged, but markets price in an 81% probability of a hike in September, according to the CME FedWatch tool.

The dollar index, which measures the performance of the US currency against a basket of six major currencies, stabilized at 101.41 points, but is on track to record a weekly gain of 0.64%.

Change in prices of some precious metals in futures and spot markets

Metal

Price (dollars/ounce)

Change amount (dollars)

Change percentage (%)

Gold (August delivery)

4029.0

(21.20)

(0.52)

Gold (spot)

4025.65

(21.50)

(0.53)

Silver (September delivery)

57.63

(0.424)

(0.75)

Silver (spot)

57.44

(0.233)

(0.40)

Platinum (spot)

1583.39

(16.86)

(0.94)

Palladium (spot)

1232.7

(24.15)

(1.92)

* At 08:20 AM Mecca time.

Gold prices and news

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Gold prices are sensitive to interest rate movements, as a rate hike increases the opportunity cost of holding the yellow metal, which yields no return. If oil prices remain above $100, inflationary pressures may escalate, increasing pressure on the Federal Reserve to raise rates. Additionally, the strength of the US dollar negatively affects gold, which is priced in the US currency. Traders are closely watching the Fed meeting next week for signals on the path of monetary policy.