These developments have significantly increased concerns over energy-driven inflation, which has been a major factor dragging gold lower in recent weeks. Markets now expect that sustained high oil prices could force central banks to adopt a more hawkish stance, limiting the appeal of non-yielding assets like gold.
The shift in rate expectations has been notable, with markets moving from pricing in multiple rate cuts earlier to now factoring in a pause and even a small probability of a rate hike in upcoming Federal Reserve meetings.
This follows the Fed’s recent decision to hold rates steady while highlighting inflation risks, alongside similar hawkish signals from the ECB and BOE, whille the RBA has already hiked rates. Overall, the transition from rate cuts to potential hikes amid persistent inflation fears has significantly pressured gold prices despite ongoing geopolitical uncertainty, says Manav Modi Commodities Analyst Motilal Oswal Financial services Ltd.
