Gold prices fell more than 3% during Monday's session, hitting their lowest level in more than seven weeks under pressure from rising U.S. Treasury yields, a stronger dollar and higher oil prices, which bolstered expectations that monetary policy tightening in the United States will continue.
Spot gold fell 3.3% to $4,146.51 an ounce by 9:25 a.m. EDT after touching its lowest level since August 5. U.S. gold futures fell 3.3% to $4,178.40.
Bond yields and dollar weigh on gold
U.S. Treasury yields continued to rise, while the dollar held near a two-month high. The 10-year U.S. Treasury yield was about 5.20% in Monday's trading after touching 5.23% last week, its highest level since 2007.
Higher yields increase the opportunity cost of holding gold, which pays no regular income, while a stronger dollar makes the U.S.-priced metal more expensive for buyers holding other currencies.
The dollar index rose to about 101.12 during the session, up roughly 0.15%, approaching its highest levels in several weeks. The index traded between 100.98 and 101.31 during the session, compared with a previous close of 100.97, and remained near its 52-week high of 101.80.
Rising oil prices fuel inflation concerns
Gold's decline coincided with a roughly 3% rise in oil prices after U.S. President Donald Trump rejected a peace deal proposed by Iran to end the conflict and reopen the Strait of Hormuz, before prices pared their gains after reports of talks by Qatari mediators with Washington and Tehran on a possible agreement to end the war.
Brent crude traded near $107.24 a barrel before falling to about $104.6, while West Texas Intermediate crude reached $94.10 before declining to $92.11.
Jim Wyckoff, a market analyst at American Gold Exchange, said the sharp rise in oil prices increases inflation risks and supports expectations of greater tightening by the Federal Reserve.
Markets price in another rate hike
The CME Group's FedWatch tool shows traders are pricing in about a 94% probability of a single interest-rate hike in December. The Federal Reserve raised interest rates by 25 basis points earlier in September, signaling that it could take further tightening steps in the coming months.
Several Federal Reserve officials have repeated warnings about persistent inflation risks, including Beth Hammack, president of the Federal Reserve Bank of Cleveland. Renewed inflationary pressures could prompt central banks to keep interest rates high for longer or continue raising them, reducing gold's appeal relative to income-generating assets.
Technical levels in focus
Gold broke below $4,240 an ounce, a level that had provided price support over the past two weeks, intensifying selling pressure and keeping the metal at its lowest levels since early August.
A technical analysis identified $4,000 an ounce as a key psychological and technical support zone if the decline continues, while noting that easing current pressure would first require a recovery above $4,240.
