Gold Extends Losses as High Oil Prices Fuel Inflation Worries

what happened

Gold futures settled lower for a second consecutive session. According to Market Talk, high oil prices continue to stoke inflation concerns and expectations for interest rates.

Fawad Razaqzada of Forex.com says the bearish trend may have lost momentum, but there is no convincing sign that the metal has hit bottom. He notes that fresh inflation signals from both hard and soft data, along with rising oil, raise the risk that central banks will need to tighten policy in the coming months.

Central bank gold buying offers some support, but may not be enough to prevent at least a temporary dip below $4,000 an ounce. In New York, the front-month gold contract fell 0.4% to $4,122.40 a troy ounce, while silver rose 1.3% to $57.706 an ounce.

why it matters

For gold, the pressure runs through rates: the stronger the expectations of tighter monetary policy, the firmer the dollar and bond yields, and the less appealing a non-yielding metal becomes. Central bank purchases remain a cushion but do not rule out a further correction.

market impact

Gold: higher oil and expectations of tighter rates press the metal; silver rose the same day.

tags

instruments