Global gold prices fell to their lowest level in more than three weeks as a strengthening US dollar and a renewed escalation between Washington and Tehran raised the risk of a fresh inflationary shock. Reuters reports the spot price of the metal declined 0.6% to $4,302.20 an ounce, the lowest level since August 7, while US December futures slipped 1.1% to $4,349.80 an ounce.
The main pressure on bullion came from a shift into the US dollar, which rallied to a two‑week high amid concerns about the consequences of a new energy shock. A stronger dollar makes dollar‑priced gold more expensive for overseas buyers. Nikos Dzaburas, senior market analyst at Tradu.com (a Jefferies affiliate), said rising oil is feeding inflationary risks and increasing pressure on the Federal Reserve to raise rates. He added that this creates countervailing winds for gold, which is caught in a “structural tug‑of‑war” between the repricing of policy and long‑term fiat‑currency depreciation trends.
Weaker demand for the non‑yielding asset is also linked to hawkish Federal Reserve rhetoric. Fed Governor Michael Barr said the central bank will have to lift interest rates if the price growth does not slow, echoing Chair Kevin Warsh’s call to bring inflation back to the 2% target. Against that backdrop, the CME FedWatch tool showed the market probability of a policy rate increase at the September Fed meeting jumping to 68%.