Gold prices declined on Monday following unexpectedly high U.S. inflation data, which heightened expectations for an interest rate hike by the Federal Reserve later this week. Additionally, a stronger dollar and rising oil prices contributed to the downward pressure on bullion. Gold was trading around $4,330 an ounce after experiencing a decline for the third consecutive week, with bullion down 1.8% last week despite concluding Friday’s session on a higher note. At 02:28, XAU/USD experienced a decline of 0.4%, settling at $4,331.84 per ounce, while Gold Futures saw a decrease of 0.8%, reaching $4,371.65. XAG/USD dropped by 1.0% to $63.88 per ounce, whereas XPT/USD increased by 0.2%, now priced at $1,802.94. The US Dollar Index experienced an increase of 0.3%, reaching a level of 99.42.

The latest pressure ensued after the August inflation data revealed that the core consumer price index increased by 0.3% on a month-over-month basis, excluding food and energy costs. The increase bolstered expectations that the Fed might implement its inaugural rate hike in three years during this week’s meeting. Markets are currently assigning an approximate 88% likelihood to a rate increase in September. Higher borrowing costs typically exert downward pressure on gold, as the metal does not yield interest, thereby enhancing the appeal of yield-generating assets. A rate increase could also generate political friction for the Fed. President Donald Trump reiterated his calls for lower interest rates on Sunday, continuing his recent criticism of the central bank’s policy stance.

Simultaneously, the inflation outlook is being complicated by the conflict in the Middle East. Brent crude advanced toward $107 a barrel following an increase of nearly 9% last week, as ongoing conflict persisted in disrupting energy markets. A meeting scheduled for Monday between Iran and several Gulf nations aimed at establishing a temporary shipping lane through the Strait of Hormuz has been postponed, casting uncertainty on efforts to enhance shipments through this vital waterway. Gold has fluctuated within a confined range around $4,400 since its recovery from a support level near $4,000 in July, as investors have consistently reevaluated the prospects for Federal Reserve policy. ANZ stated it maintains a positive outlook on gold, even in light of anticipated additional monetary tightening.

The bank anticipates that rising tensions in the Middle East, coupled with increasing energy prices, will contribute to a further uptick in inflation. Consequently, it projects three rate hikes of 25 basis points each by March 2027 from the Federal Reserve. However, ANZ stated that these inflationary pressures are being influenced by geopolitical disruptions, which it contends should maintain gold’s status as a safe haven asset. The bank consequently upheld its 12-month gold price target at $5,400 per ounce. Investment demand is serving as an additional source of support. ANZ reported that gold ETF holdings and speculative positions have rebounded in recent months, with robust institutional demand in China and a rise in investor participation in India also bolstering the market.