Gold Tumbles On Rate Hike Fears

(RTTNews) - Gold prices fell sharply on Wednesday as investors kept a close eye on developments between the U.S. and Iran, and looked forward to a crucial U.S.-China summit on Thursday, which could lead to new trade agreements amid escalating competition and restrictions on advanced technologies.

Spot gold fell nearly 1 percent to $4,315.90 an ounce, weighed down by a stronger dollar on prospects of interest rate hikes in the near term. U.S. gold futures were down half a percent at $4,353.09.

While falling oil prices helped ease inflation fears, hawkish comments from several Federal Reserve officials reinforced market expectations that interest rates will stay higher for longer.

The U.S. dollar held near a two-month high after several Federal Reserve officials stressed that additional rate hikes may be needed to lower inflation.

Chicago Fed President Austan Goolsbee noted that supply stocks have become more frequent and more persistent in recent times, and the Fed can longer simply "look through" them as transitory factors, hinting at further tightening.

St. Louis Fed President Alberto Musalem said additional rate hikes may be needed to lower inflation resulting from strong demand as well as a commodity price shock.

Richmond Fed President Tom Barkin and Boston Fed President Susan Collins also stressed that inflation risks outweigh employment risks.

Meanwhile, U.S. President Donald Trump has expressed support for a possible ban on diesel exports to address the issue of escalating energy costs, sparking debate among U.S. officials and energy experts about economic and global impacts.

European natural gas inventories have fallen to levels not seen since 2021, raising fears of a repeat of the 2022 energy crisis.

In economic releases, U.S. manufacturing and service PMI figures will be in the spotlight later today ahead of reports on initial jobless claims, new home sales, durable goods orders and consumer confidence later in the week.

Oil prices held steady in early European trade after recent string of losses on hopes for progress in U.S.-Iran talks to end the ongoing conflict in West Asia.

Helping ease concerns over a prolonged conflict, media reports suggested that Iran is ready to reopen the Strait of Hormuz within seven days if the United States eases military pressure and lifts its blockade on Iranian ports.

U.S. President Trump reported a productive three-hour meeting between his team and an Iranian delegation in New York, adding they would have another one scheduled in the near future.

Trump said that a deal with Iran may be possible after the midterm elections, but he may instead just decide to "annihilate the Islamic Republic" if no deal is reached.

According to Reuters sources, Saudi Arabia has restarted its East-West oil pipeline and may have resumed exports from the Red Sea port of Yanbu following drone attacks on September 11.