Big shock in the international gold market

The renewed tensions in the Middle East and the prospect of a US interest rate hike have had a major impact on global gold prices. The precious metal has seen a sharp decline in prices, according to Reuters.

Spot gold prices fell 0.3 percent to $4,437.10 an ounce at 8:35 a.m. Bangladesh time on Tuesday (September 1). It had reached its lowest level since August 19 in the previous session. However, US gold futures rose 0.1 percent to $4,485.30. 

One of the factors that is putting pressure on the gold market is the recent hawkish stance of Federal Reserve Chairman Kevin Warsh. In his speech in Jackson Hole, he indicated that the Fed may have to take further action if there is not enough confidence that inflation will return to its 2 percent target. After that, the price of gold fell more than 3 percent on Friday.

According to the CME FedWatch tool, traders currently see a 66 percent chance of a U.S. interest rate hike in September and an 89 percent chance of a hike in December. Rising interest rates typically reduce the appeal of gold, as interest-earning assets become more attractive to investors than the interest-free metal.

Meanwhile, fears of a new US-Iran conflict in the Middle East are also adding to market volatility. US President Donald Trump threatened more attacks on Iran on Monday. As a result, oil prices also rose for the second consecutive day. Brent crude rose above $91 a barrel.

According to analysts, rising oil prices could further increase inflation fears. And if the Fed moves to raise interest rates to control inflation, it could put further pressure on gold.

Meanwhile, among precious metals, apart from gold, spot silver prices rose 0.3 percent to $66.34, platinum rose 0.1 percent to $1,793.03, and palladium remained unchanged at $1,356.75.