Gold falls as inflation worries fuel rate hike fears
What's the story
Gold prices witnessed a dip in early Asian trading on Monday. The decline comes amid rising tensions in the Middle East and persistent inflation concerns, which have heightened expectations of interest rate hikes. Spot gold fell 0.2% to $4,368.33 per ounce while US gold futures for December delivery dropped by 0.4%, standing at $4,406.70 as of 0027 GMT today.
Market response
Geopolitical tensions and inflation impact global interest rates
The latest escalation in the Middle East, with Yemen's Houthis claiming responsibility for missile and drone attacks on "sensitive" sites in Saudi Arabia's capital Riyadh, has further fueled inflation concerns.
This geopolitical unrest is contributing to a potential new cycle of global interest rate hikes as major central banks respond by raising rates to combat inflation exacerbated by the US-Iran war.
Rate adjustments
Rising interest rates reduce gold's appeal
The Bank of Japan recently joined other major central banks in tightening its monetary policy, following rate hikes by the US Federal Reserve and European Central Bank.
While gold is traditionally viewed as a hedge against inflation, rising interest rates tend to decrease its appeal by making interest-bearing assets more attractive.
This has led Indian buyers to hold off on gold purchases last week, awaiting lower prices.
Precious metal performance
Precious metals other than gold show slight gains
Despite the dip in gold prices, other precious metals have shown a slight uptick.
Spot silver rose by 0.1% to $66.31 per ounce while platinum gained 0.1% to $1,801.20 and palladium added 0.1% at $1,303.70 per ounce, respectively.