Gold prices plunge over 4% amid Fed rate hike expectations

Gold prices dropped by 4.06% on Monday, reaching their lowest point since August 4. This decline occurred alongside rising oil prices and increasing market anticipation that the Federal Reserve will raise interest rates again.

Futures contract performance

By 17:47 Moscow time, December delivery gold futures on the COMEX exchange had fallen 3.98%, trading at $4,149.3 per ounce. The downward momentum accelerated shortly after, with prices hitting $4,145.9 per ounce by 17:52.

This specific price level marked a 4.06% decrease, representing the first time since August 4, 2026, that gold had retreated to such lows.

Drivers behind the decline

Reuters reported that a stable dollar combined with persistently high yields on US Treasury bonds intensified pressure on gold, which is priced in the American currency. Giovanni Staunovo, a commodity analyst at UBS bank, identified two primary factors driving the sell-off: elevated oil prices and forecasts for additional Federal Reserve rate increases.

Interest rate context

The US central bank implemented its first rate hike in three years earlier this month, raising borrowing costs by a quarter of a percentage point to a range between 3.75% and 4%. Data from CME Group’s FedWatch tool indicates that traders currently assign a 66% probability to another US interest rate increase occurring in October 2026.

While gold is widely viewed as a hedge against inflation, an environment characterized by higher interest rates increases the opportunity cost of holding the metal, given that it generates no yield.