Gold prices declined on Monday following a surprising announcement from OPEC+ regarding a 0.8% cut in oil production, bringing the price to $1,951.37 per ounce. Meanwhile, U.S. gold futures dropped 0.9% to $1,968.20. The increase in interest rates aimed at curbing inflation raises the opportunity cost of holding the non-yielding precious metal.
In this context, Matt Simpson, Senior Market Analyst at City Index, confirmed that "the drop in gold comes as investors assess the attractiveness of gold as a safe-haven asset against the likelihood of sustained interest rate hikes for an extended period. Clearly, concerns about inflation and rising interest rates have taken precedence."
Markets now anticipate a 57.9% chance that the Federal Reserve will raise interest rates by a quarter point in May, which has boosted the dollar and increased the cost of dollar-denominated gold for buyers holding other currencies.
ANZ noted in a memo that "demand for gold as a safe-haven asset has decreased with the easing of banking turmoil in the U.S."
Gold prices rose approximately 8% in the last quarter after recent global banking disruptions bolstered bets on the Federal Reserve slowing the pace of interest rate increases.
As for other precious metals, silver declined in spot transactions by 2.1% to $23.56 per ounce, platinum fell by 1% to $981.89, and palladium dropped by 0.7% to $1,449.94.
