Gold drops over 1% as oil rally fuels Fed rate-hike bets

Gold prices fell more than 1% on Monday, dropping to $4,223.95 per ounce, as rising oil prices intensified inflation concerns and strengthened expectations of further Federal Reserve interest rate hikes. The decline was driven by a rebound in oil prices of over 1%, fueled by geopolitical tensions after US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz. Higher energy costs can fuel inflation, and while gold is a hedge against inflation, high interest rates increase the opportunity cost of holding the non-yielding metal. The Fed raised rates earlier this month to between 3.75% and 4%, with traders pricing in a 66% chance of another hike in October. Investors are watching US labor market and inflation data this week, including job openings, ADP employment, PCE price index, and nonfarm payrolls. Stronger-than-expected figures could further pressure gold. Other precious metals also fell, with silver down 2.6%, platinum down 2.1%, and palladium down 2.1%.