Gold drops through Monday morning trading as speculation grows around a Fed interest rate hike this week, sparked by surging oil prices and a key inflation report, which came out Friday.
Oil prices continued to rally after Saudi Arabia shut a key pipeline because of drone attacks, adding to inflationary concern and the speculation of a Fed rate increase. Hostilities between the U.S. and Iran have intensified in recent weeks, triggering further fears of oil supply disruptions around the critical maritime chokepoint, the Strait of Hormuz.
The consumer price index report for August showed that inflation came in slightly higher than economists had expected, mostly on soaring fuel prices from the war with Iran. Fed policymakers are set to announce their next monetary policy decision on Wednesday. Higher interest rates are considered bearish for gold, making the yellow metal a less attractive alternate investment.
December gold futures fell 1.5% last week to settle at $4,408.90 an ounce on Comex, though the front-month contract edged up $1.60 Friday. Bullion rose 9.1% last month after gaining 1.7% in July, its first monthly increase since February, and sliding 12% in June. It decreased 7% in the first half of 2026 after rallying 64% last year. The December contract is currently down $100.10 (-2.27%) an ounce to $4308.80 and the DG spot price is $4277.70.
Core CPI, which excludes volatile food and energy prices, rose 0.3% in August from the month earlier, surpassing forecasts for a 0.2% increase. On an annual basis, core CPI was up 2.4% in August, matching estimates. Headline CPI, which includes food and energy, was up 0.4% from July and 3.4% from a year earlier.
The CPI data came a day after U.S. producer price index data for August showed the biggest rise in three months because of high energy prices.
The Fed closely watches inflation and labor market data when setting monetary policy.
Over 90% of investors tracked by the CME FedWatch Tool are now betting that the Fed will raise interest rates by 25 basis points to 3.75% to 4.00% on Wednesday, while the rest are expecting rates to remain unchanged at 3.5% to 3.75%. The Fed has kept interest rates unchanged this year after three previous rate cuts.
The European Central Bank last week raised its key rate to 2.50% in its second rate increase this year and warned that inflationary pressures won’t be going away soon.
December silver futures decreased 2.3% last week to settle at $65.19 an ounce on Comex, though the front-month contract rose 0.4% Friday. The most-active contract touched a record above $115 in January. Silver climbed 16% last month after sliding 3.6% in July and declining 21% in June. It lost 15% in the first half of 2026 after rising 141% last year. The December contract is currently down $1.823 (-2.80%) an ounce to $63.365 and the DB spot price is $63.15.
Spot palladium declined 5.5% last week to $1,317.00 an ounce after but rose 1.9% Friday. Palladium rallied 5.7% last month after adding 5.8% in July and dropping 11% in June. It retreated 25% in the first half of 2026 after rising 74% last year. Currently, the DG spot price is down $20.00 an ounce to $1296.00.
Spot platinum tumbled 1.3% last week to $1,800.80 an ounce. It retreated $1.60 Friday. Platinum rose 7.5% last month after gaining 6.6% in July and tumbling 19% in June. Platinum slid 23% in the first half of 2026 after increasing 122% in 2025. The DG spot price is currently down $33.70 an ounce to $1763.90.
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