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Gold falls as oil jumps and rate hike bets rise

Fed Governor Christopher Waller signaled the FOMC may need to tighten soon if core inflation runs hot, shifting rate expectations for July and September.

Reported · Written up by our desk · Major Pairs

Gold is sliding as two cross-currents move in the same direction, with surging oil reviving inflation concerns and growing expectations that the Federal Reserve could tighten again if price pressures do not ease, according to Action Forex.

Oil added to the backdrop after US President Donald Trump announced plans to impose shipping fees on cargo transiting the Strait of Hormuz and to restore a blockade of Iranian ports, a development that raised expectations for higher energy costs and renewed supply disruptions.

The inflation risk channel is key for gold, Action Forex said, because higher oil prices increase the chance that inflation stays elevated, leaving the Fed less able to keep policy unchanged. The article also points to comments from Federal Reserve Governor Christopher Waller, who said that if another hot core inflation reading appears, the FOMC would need to consider tightening in the near term, and that a strong inflation print would be a signal, not noise.

Those remarks accelerated a repricing in interest-rate markets, with Fed funds futures implying better than a 40% chance of a July rate hike, compared with roughly one in four a week ago, and about a 76% probability of a September increase, up from 57%. Investors are also focused on the June CPI report and Fed Chair Kevin Warsh’s first congressional testimony, events that could either reinforce or challenge the more hawkish outlook, while the article flags the $4,000 level and recent lows as near-term technical battlegrounds.

Latest closeGold $4,011.00 ▼2.3%

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