【TMGM Financial Recap】 Rate hike expectations continue to weigh on gold, gold prices hit a one-month low, and the outcome of the bullish and bearish battle is about to be revealed!
Gold prices weakened with volatility on Monday, with spot gold prices dropping to $4,253.54 per ounce, the lowest level since August 7. A combination of factors—escalating Middle East conflicts, surging oil prices, higher-than-expected inflation data, and a surge in the probability of Fed rate hikes—has put pressure on gold prices.
The gold market's performance clearly reflects investors' reconsideration. Spot gold not only broke below key support but also touched a low of over a month, indicating concentrated selling pressure.Crude oilThe sharp rise in prices has directly driven up inflation expectations, meaning major central banks worldwide will have to implement stricter monetary tightening measures to curb rising prices, which is clearly negative for the non-yielding asset gold.
Last Friday's U.S. August inflation data was stronger than expected, breaking the previously fragile market consensus that the Fed would keep rates unchanged. Surveys show that most economists now expect the Fed to raise rates at Wednesday's policy meeting, and may raise rates at least once before the end of March next year. The CME FedWatch tool has pushed the probability of a rate hike this week to about 93%. Meanwhile, rising energy prices and Middle East tensions show little sign of easing, and the market also expects the Bank of Japan to raise rates on Friday. Against the backdrop of rising global tightening expectations, the opportunity cost of holding gold has risen significantly, and investors naturally choose to sell off to avoid pressure from a higher interest rate environment.
The synchronized strengthening of the US dollar further amplified downward pressure on gold prices. The US dollar index rose to a two-week high, making dollar-denominated gold more expensive for holders of other currencies, thereby suppressing international buying. It can be said that Monday's drop in gold prices was essentially an asset reallocation driven by interest rate expectations, rather than a simple fading of safe-haven demand.
The real trigger for market sentiment is the sharp deterioration of Middle Eastern geopolitics. Yemen's pro-Iranian Houthi forces attacked the Khamis Mushait airbase in southern Saudi Arabia again on Monday, launching dozens of missiles and drones. Meanwhile, a key Saudi oil pipeline was paralyzed last Friday due to an attack; it was originally an important export route for Gulf region oil to bypass the blockaded Strait of Hormuz. Even more worrying is the ongoing blockade of the Strait of Hormuz, which has been largely closed since the outbreak of the Iranian war on February 28. Oman's originally scheduled Monday talks to reopen the strait with Iran and Gulf countries were postponed due to Saudi demands, further fading diplomatic hopes.
Market Insight:
Gold's fate largely depends on the actual implementation of this week's Federal Reserve decision. If the Fed raises rates as the market expects and sends further tightening signals, gold prices may continue to come under pressure. Conversely, if the decision is dovish, gold prices may see a technical rebound.
