Gold Prices Suffer Major Blow, Fall to Nearly Two-Week Low

Karachi: Gold prices have once again witnessed a significant decline in the international market, with the precious metal falling to nearly a two-week low amid growing expectations of a possible interest rate hike by the US Federal Reserve.

According to foreign news agencies, spot gold prices fell 0.3% on Monday to $4,439.31 per ounce, reaching their lowest level since August 19.

Gold prices had also declined by more than 3% last Friday, shifting investors’ focus toward the US Federal Reserve’s upcoming monetary policy and interest rate decision.

Hawkish Policy Weighs on Gold

The decline in gold prices is being attributed largely to signals of a hawkish monetary policy stance from US Federal Reserve Chairman Kevin Warsh.

Speaking at the Jackson Hole Economic Symposium, Warsh reportedly said that the Federal Reserve would need to take further action if it did not gain sufficient confidence that inflation was moving toward its 2% target, raising expectations of higher interest rates.

Gold is generally considered a safe-haven investment against inflation. However, higher interest rates can reduce the appeal of gold because the precious metal does not provide investors with regular interest or income.

Markets are currently pricing in roughly a 60% probability of a US interest rate hike in September.

Middle East Tensions

Meanwhile, escalating tensions in the Middle East have also affected global financial markets. Rising tensions between the United States and Iran have pushed oil prices higher, raising concerns about increased inflation worldwide.

Analysts say that if higher oil prices persist, central banks could face greater pressure to keep interest rates elevated or raise them further to control inflation.

Such a scenario could remain a negative factor for gold prices, as higher interest rates generally reduce demand for non-yielding assets such as gold.