Gold falls below $4,000 for the first time since July as oil fuels Fed hike bets
Rising oil prices lifted Fed rate-hike bets and a tech sell-off pushed investors to sell gold to cover losses, leaving the traditional haven on track for its worst week since June.
By James Mitchell ·
Why it matters: Gold failed to act as a haven in this week's sell-off, and oil-driven inflation fears are keeping a December Fed hike in play heading into next week's meeting.
For information only, not investment advice.
Gold is supposed to be where money hides when markets get rough. This week it fell alongside stocks, even as Treasuries rallied. Spot gold slipped below $4,000 an ounce on Friday for the first time since July, Reuters reported, and was on track for its worst week since June.
Two forces did most of the damage. The first is oil. Rising oil prices stoked inflation worries and reinforced expectations that interest rates could stay elevated for longer, Anadolu Agency reported. Last week's US consumer and producer inflation data came in hotter than expected, according to Reuters. Traders largely expect the Fed to hold rates at its October 27-28 meeting, but CME's FedWatch tool showed a 78% probability of a December hike, Reuters said.
The second is forced selling. Losses in tech and AI stocks prompted investors to sell precious metals to cover losses elsewhere in their portfolios, Anadolu said. Long-dated US Treasury bonds rallied Thursday as investors sought safety, Kitco News reported, but gold didn't share in it. Berenberg said it was the first time since December 2008 that gold had fallen alongside such a steep drop in Treasury yields, the Seoul Economic Daily reported.
Not everyone reads this as a turn. "Clearly, we are still witnessing a battle between short-term, technically driven traders looking for downside opportunities and longer-term investors whose underlying demand, as far as I can see, remains robust," Saxo Bank's Ole Hansen told Kitco. Wall Street is gloomier: in Kitco's weekly survey, 7 of 17 analysts forecast further declines next week. Those are forecasts, not facts.
What comes next for your money: the Fed's October 27-28 meeting, then September's PCE report, the Fed's preferred inflation gauge, on October 29, according to Reuters.
Sources
- Gold set for steep weekly loss as rising oil prices bolster Fed rate hike bets, Reuters (via Kitco News)
- Gold set for steep weekly loss as rising oil prices bolster Fed rate hike bets, CNBC (Reuters)
- Gold falls below $4,000 for 1st time since July, Anadolu Agency
- Gold's $4,000 support breaks, but is the selloff overdone?, Kitco News
- Wall Street doubts gold's near-term strength, Main Street maintains bullish minority as central banks take center stage, Kitco News
- Gold Slides Below $4,000, Down 29% From January Peak, Seoul Economic Daily
Tags: markets-moves · fed · interest-rates · inflation · energy · analysts