Gold prices fell on Monday after a surprise announcement by OPEC + to cut oil production raised concerns about inflation and increased bets on raising interest rates at the next Federal Reserve meeting in May.
Spot gold prices fell 0.8 percent to $1951.37 an ounce by 0401 GMT, the lowest level in about a week. US gold futures also fell 0.9 percent to $1968.20.
Raising interest rates to curb inflation would increase the opportunity cost of holding non-yielding precious metal.
Matt Simpson, chief market analyst at City Index, said that the decline in gold comes “with investors assessing the attractiveness of gold as a safe-haven asset against the possibility of continuing to increase interest rates for a longer period. It is clear that the balance of fears of inflation and high interest rates outweighed.”
Oil prices jumped after Saudi Arabia and other OPEC+ oil producers announced production cuts, a possible bad omen for global inflation just days after slowing US price data boosted market optimism.
Consumer spending in the United States increased moderately in February and showed signs of slowing, although it remained high.
Markets now expect by 57.9 percent that the Federal Reserve will raise interest rates by a quarter point in May, which has boosted the dollar and made gold denominated in the greenback more expensive for buyers holding other currencies.
ANZ noted in a note that “the demand for gold as a safe haven declined with the easing of US banking turmoil.”
Gold prices rose nearly 8 percent in the fourth quarter after recent global banking turmoil increased bets that the Federal Reserve will slow the pace of interest rate hikes.
As for other precious metals, silver fell in spot transactions by 2.1% to $23.56 an ounce, platinum fell 1% to $981.89, and palladium fell 0.7% to $1449.94.