Key Highlights

  • Spot gold fell about 1.4% to 2% to near US$4,071 to US$4,091 an ounce.
  • Rising oil prices and firm jobless data reinforced higher-for-longer rate bets.
  • Traders now price a 78% chance of a September Fed hike, up from 68% a day earlier.

Precious metals reversed a short-lived rally, with spot gold falling about 1.4% to 2% to near US$4,071 to US$4,091 an ounce. The decline came as rising oil prices and stronger jobless claims data reinforced expectations that interest rates will stay higher for longer, reducing the appeal of assets that pay no yield.

Higher-for-longer weighs on metals

Gold and silver typically struggle when real interest rate expectations rise, because holding non-yielding metal becomes more expensive relative to interest-bearing assets. The latest jobless claims figures pointed to continued labour market resilience, which markets read as reducing the case for near-term rate cuts.

At the same time, the oil-driven inflation scare has pushed traders to price a higher chance of tighter policy.

Rate expectations shift sharply

Traders now assign a 78% chance of a Federal Reserve rate hike in September, up sharply from 68% just a day earlier. A move of ten percentage points in implied probability over a single session reflects how quickly the energy shock has reshaped the policy outlook.

The prospect of a hike, rather than a hold or a cut, marks a notable shift in market thinking and helps explain the pressure on metals.

A rally that faded

The metals had briefly rebounded before giving back gains, a pattern consistent with a market caught between competing forces. Safe-haven demand from Middle East tensions offers some support, while rising rate expectations pull in the opposite direction.

When yield-related pressure dominates, even geopolitical risk premiums can prove insufficient to hold prices up.