Global gold prices plunge to a 7-week low

Each ounce of gold lost up to 170 USD on the first trading day of the week, as crude oil prices rose, fueling concerns about continued interest rate adjustments.

Global spot gold prices closed on 28/9, dropping by 170 USD to 4,114 USD per ounce. This marks the lowest level since 5/8. On the morning of 29/9, prices slightly increased to 4,120 USD. The market declined as crude oil prices rose, sparking inflation and interest rate hike concerns. A stronger US dollar and increasing US government bond yields further challenged the precious metal.

The recent surge in crude oil prices has complicated the inflation outlook, prompting analysts to suggest further tightening by the US Federal Reserve (Fed). Jim Wyckoff, a market analyst at American Gold Exchange, explained, "Crude oil prices have bounced back, complicating the inflation issue. The US Federal Reserve (Fed) may tighten policy further".

The US dollar is currently at its highest level in nearly two months against a basket of major currencies, making gold more expensive for non-US buyers. Concurrently, US government bond yields are extending their upward trend, which increases the opportunity cost of holding non-yielding assets like gold.

Global oil prices rose an additional 3% on the first trading day of the week, following US President Donald Trump's rejection of Iran's peace proposal last weekend. The proposal aimed at ending the conflict and reopening the Strait of Hormuz. High oil prices are expected to push up inflation, compelling central banks to maintain higher interest rates for longer periods.

While gold is a traditional hedge against inflation, elevated interest rates diminish its appeal. CME's FedWatch Tool indicates that investors currently forecast a 94% probability of the Fed raising rates in December. Earlier this month, the Fed increased interest rates by 25 basis points (0.25%), signaling potential adjustments in the coming months. Recently, several Fed officials also warned that inflation risks persist and rates might need to increase further. This week, the US will release additional reports on employment and inflation.