The drop in gold price to $4271.59 during trading on Tuesday, September 15, occurred due to rising oil prices and the possibility of an increase in Federal Reserve interest rates. This price drop is considered the lowest level for gold in over a month, and gold futures also fell by 2.2% to $4311.20.
Factors Influencing the Drop in Gold Prices
Several factors have contributed to the decrease in gold prices, including the rising value of the dollar, the surge in oil prices, and the potential increase in Federal Reserve interest rates. Reports indicate that the likelihood of an interest rate hike at the September meeting has reached about 88%. This interest rate increase could be the first in three years and would strengthen the dollar while increasing the cost of holding gold for investors.
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The Impact of Rising Oil Prices on the Gold Market
Brent oil prices have recently reached the range of $107 to $108 per barrel. This increase in energy prices has raised concerns about ongoing inflation and, consequently, strengthened expectations for an increase in Federal Reserve interest rates. Disruptions in oil supply in the Middle East and the closure of the East-West pipeline in Saudi Arabia have also contributed to this situation.
Meanwhile, U.S. economic data shows that inflation in August was stronger than market expectations, increasing the likelihood of an interest rate hike at the Federal Reserve meeting on September 15 and 16. The yield on 10-year U.S. Treasury bonds has also reached 5.03%, the highest level since 2007, which has contributed to the increased opportunity cost of holding gold.
As a result, the strengthening dollar and rising interest rates have led to a decrease in demand for gold, putting pressure on this precious metal. Given these factors, the gold market is in a sensitive position, and investors should closely monitor economic developments.
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