Gold tumbles to seven-week low amid oil rally, rate hike expectations

Spot gold traded down 3.8 per cent to US$4,121.58 per ounce, marking a significant retreat in the precious metals market. The yellow metal hit an intraday low of US$4,110.55, its weakest level since August 5, signalling renewed pressure on traditional safe-haven assets.

The downturn in gold prices coincided with a surge in crude oil, which has stoked market expectations of more aggressive central bank rate hikes to combat inflationary pressures. Rising energy costs typically feed into broader inflation concerns, prompting investors to reassess the likelihood of tighter monetary policy ahead.

Higher interest rates generally weigh on gold, which generates no yield and becomes less attractive relative to interest-bearing assets when borrowing costs rise. The inverse relationship between gold and rates has been a key driver of price movements in recent months as markets parse signals from policymakers across major economies.

The decline reflects shifting sentiment among investors who are rotating out of precious metals amid expectations of sustained higher rates. Gold remains sensitive to broader economic data and central bank guidance, with any signs of persistent inflation likely to keep upward pressure on rate-hike bets in coming weeks.