Gold prices have weakened amid rising oil costs and stronger expectations for Federal Reserve interest-rate increases. The metal traded near $4,320 an ounce on Friday, showing minimal movement after a 1.8% decline in the previous session—the lowest level since early August. These developments signal growing worries about inflation and central bank policy, with traders now assigning a 70% probability to a Fed rate hike during its September 15, 16 gathering.
A key driver behind gold’s retreat is the sharp rise in energy markets. The U.S. producer price index climbed 0.4% in August, marking the largest increase since May, as oil and other commodity costs surged. Brent crude was close to $108 a barrel, supported by heightened tensions in the Middle East. The U.S. and Iran remain engaged in an extended dispute, with recent attacks involving oil tankers, a Jordanian airbase, and Saudi facilities attributed to Iranian-backed factions.
Gold’s struggles are also linked to rising bond yields, which advanced after the Treasury’s initial expanded buyback program resulted in lower-than-expected demand. This outcome has raised doubts about whether U.S. Treasury Secretary Scott Bessent’s efforts to stabilize markets and limit yield spikes will be effective. Since gold offers no income, it tends to underperform when yields move higher. The Treasury’s intervention, while unusual, had previously helped ease upward pressure on long-term rates, but the limited uptake in this latest operation suggests investors may be pricing in a more prolonged period of tighter financial conditions.
The next critical economic report will be Friday’s consumer price index release, which may offer additional insight into Fed policy ahead of the upcoming meeting. Silver dropped 0.1% to $63.58 an ounce, continuing a 5.5% decline from Thursday, the steepest fall since June. Platinum and palladium prices held steady, while the Bloomberg Dollar Spot Index remained unchanged after a slight prior-session gain. The dollar’s relative stability contrasts with the volatility in precious metals, as traders weigh whether the Fed’s potential rate hike will strengthen the currency or whether geopolitical risks could offset monetary policy effects.
As of late trading, spot gold stood at $4,318.48 an ounce in Singapore. Investors are now assessing whether the Fed’s next policy decision will outweigh gold’s customary function as protection against instability.