Gold slips below $4,370 as oil rally fuels inflation anxiety

North American equity markets mirrored the cautious sentiment, with the S&P 500 shedding 0.6% and the Dow Jones Industrial Average dropping 1.2%. Investors are increasingly focused on the intersection of energy prices and central bank policy, with markets assigning a 60% probability to a rate hike at the Federal Reserve’s September 15-16 meeting. This hawkish outlook has driven 10-year Treasury yields to 4.80%, a level not seen since late 2023, creating a challenging environment for non-yielding assets like gold.

While geopolitical instability in the Strait of Hormuz typically bolsters precious metals, the current market dynamics treat gold primarily as a function of dollar strength and interest rate expectations. Analysts note that higher oil prices, fueled by potential supply disruptions in the Gulf, are exacerbating inflation concerns rather than acting as a catalyst for defensive buying. Traders are now positioning for Thursday’s Producer Price Index and Friday’s Consumer Price Index, which serve as the final inflation data points before the Fed’s upcoming decision. Gold remains technically pressured, having failed to clear the $4,422 resistance zone, leaving bears targeting a break below the $4,365 support floor.