Gold slips as oil gains strengthen case for elevated interest rates

Gold fell on Tuesday, as rising crude oil prices heightened inflation worries and reinforced U.S. rate-hike expectations ahead of a Federal Reserve policy meeting.

FUNDAMENTALS

Spot gold was down ​0.3% at $4,285.91 per ounce, as of 0015 GMT, after hitting its lowest in more than a month in the previous session. U.S. gold futures for December delivery were down 0.6% at $4,326.90.

The U.S. central ⁠bank ⁠will announce its policy decision at 2 p.m. EDT (1800 GMT) on Wednesday following the end of ​a two-day meeting.


Financial markets are betting heavily that Fed policymakers will lift their benchmark rate ​a quarter of a percentage point to a 3.75%-4.00% range and signal further tightening ahead.

Data on Friday showed U.S. consumer prices accelerated in August, while a ​key measure of underlying inflation posted its largest increase ⁠in four months.

Yemen's Iran-aligned Houthis launched a new attack on Saudi ​Arabia on ​Monday and Gulf Arab states postponed planned talks with Iran, ⁠raising concerns the Middle East conflict could spread further and ​threaten global oil supplies.

Oil prices extended gains. Higher ​energy costs can fuel inflationary pressures across the economy.

Though seen as a hedge against inflation and geopolitical risks, gold often loses appeal when rates increase as they raise the opportunity cost of holding non-yielding bullion.

Benchmark 10-year Treasury yields hit the key psychological level of 5% on Monday for the first ‌time since October 2023. The milestone is a threshold that analysts say could ripple through the U.S. economy and threaten the bull market ​in stocks ​by denting the relative ⁠appeal of U.S. equities.

Spot silver fell 0.4% to $62.99, platinum lost 0.4% at $1,752.85 and palladium ticked 1% lower to $1,279.75.

DATA/EVENTS (GMT)

0200 China Urban Investment (YTD) YY Aug

0200 China Retail Sales YY Aug

0200 China ​Unemp Rate Urban Area Aug

0430 Japan Tertiary Ind Act NSA Jul

0600 UK Claimant Count Unem ChngAug

0600 UK ILO Unemployment Rate Jul

0600 UK HMRC Payrolls Change Aug

0645 France CPI (EU Norm) Final MM, YY Aug

0645 France CPI YY, MM NSA Aug

0900 EU Total Trade Balance SA Jul

0900 Germany ZEW Economic Sentiment Sep

0900 Germany ZEW Current Conditions Sep

1000 EU Reserve Assets Total Aug