Gold fell pressured by rising rate-hike odds as energy price spikes revived inflation fears, boosting the dollar and bond yields.
Gold extended losses as surging energy costs fueled rate-hike bets, lifting the dollar and Treasury yields. Higher interest rates reduce the relative appeal of non-yielding bullion, pushing prices lower amid a bearish technical breakdown.
Gold is probing support near $1,920 an ounce, with a break below risking a slide toward the 200-day moving average at $1,890.
If energy price spikes trigger a global recession, safe-haven demand could return and lift gold, offsetting rate-hike pressures, but for now tightening fears dominate.
The dollar index firmed as surging energy costs boosted inflation and rate-hike expectations, widening the yield advantage of the greenback. Hawkish Fed rhetoric following the energy move added to the bullish sentiment.
The dollar index is eyeing a retest of the 105.00 resistance, a level last seen in March, with a break above opening the door to 106.50.
While energy costs are a near-term catalyst, sustained dollar gains may require broader core inflation acceleration and consistent hawkish Fed signals beyond energy base effects.
Crude oil prices climbed, driving the broader energy cost surge that fueled inflation concerns and rate-hike expectations. Tight supply and geopolitical premiums reinforced the rally, though the stronger dollar may cap gains.
Both crude oil and natural gas prices have surged, with WTI crude nearing $80 a barrel and European gas benchmarks jumping on supply worries.
A stronger U.S. dollar makes dollar-denominated crude more expensive for holders of other currencies, which can cap upward price momentum.
Gold prices extended declines on Thursday as surging energy costs reinforced expectations that the Federal Reserve will maintain aggressive rate hikes to curb inflation, lifting the dollar and Treasury yields. Higher borrowing costs reduce the appeal of non-yielding bullion, while crude oil’s rally further stoked inflation concerns. The move underscores a shift in investor focus from safe-haven demand to monetary policy tightening.
Gold typically benefits from inflation, but when surging energy costs raise expectations of aggressive rate hikes, the opportunity cost of holding non-yielding gold increases, driving investors toward the dollar and bonds.
Higher energy prices feed into overall inflation, prompting the Fed to maintain or accelerate interest rate increases to cool the economy, which strengthens the U.S. dollar and weighs on gold.