【TMGM Financial Recap】Oil Prices Soar, Combined With The Fed's Hawkish Streak, Gold Hits A New One-Week Low, $4,200 Becomes A Key Support Level!

On Thursday, the global gold market showed clear signs of pressure again, resulting from the simultaneous efforts of energy prices, interest rate expectations, and the dollar's movement. Gold, as a traditional safe-haven and inflation hedge, is currently being temporarily sidelined by the market due to higher holding costs and a stronger dollar. 

The direct trigger driving gold prices down came from the crude oil market. On Thursday, the Houthi forces launched a missile attack on Saudi Arabia. Although Saudi Arabia successfully intercepted the related ballistic missiles, market concerns over supply disruptions in the Middle East quickly grew. Crude oil futures closed at their highest level since September 15, and this wave of price rebound has directly pushed energy costs back into the spotlight. 

Rising energy prices often pass on to overall prices through production costs. When producers pass higher fuel and raw material costs downstream, inflation expectations are reignited. At this point, although gold theoretically functions as an inflation hedge, in actual trading, the market focuses more on possible measures the central bank might take. Once inflationary pressures resurface, the probability of policy rates rising increases, and rising rates precisely raise the opportunity cost of holding gold.

The synchronized rise in energy prices and interest rates is continuously putting pressure on gold. Energy costs are driving up inflation concerns, increasing the likelihood of further Federal Reserve tightening, thereby weakening gold's appeal. 

Resonating with the rise in oil prices has been a recent wave of hawkish statements from Fed officials. Last week, the Fed raised rates for the first time in three years, raising the target range by 25 basis points to 3.75%-4.00%. Since then, several officials have continued to emphasize that if inflation does not significantly decline, further action is still necessary. On Thursday, the Philadelphia Fed and New York Fed presidents each stated that to curb unacceptably high inflation, the Fed may need to raise rates again.

Market Insight:

Investors currently expect the probability of the Fed raising rates at the October meeting to about 69%. Meanwhile, the yield on the U.S. 30-year Treasury note once rose to 5.5016%, the highest since June 2004. The steeper yield curve and overall upward trend have directly increased the opportunity cost of holding interest-free gold, causing some funds to shift toward dollar assets that offer positive returns.