Gold Halves August Jump on War-Fuelled Oil, Food Price Inflation

GOLD PRICES tumbled on Tuesday as London traders returned from the end of the UK's summer holidays, dropping to 2-week lows as long-term interest rates leapt again in the bond market on rising oil and food prices plus higher inflation data.

Japan's 10-year borrowing costs broke above 3.0% per annum, the highest in 3 decades, while the UK's 30-year Gilt yield topped 5.90% for the first time since 1998.

The cost of living across the 21-nation Eurozone rose 3.3% per year in August, new figures said this morning, the fastest inflation in almost 3 years.

Betting on this month's Federal Reserve meeting now puts a 2-in-3 chance on the US central bank raising its overnight interest rate on 16 September, the highest odds in a month and twice the likelihood seen in mid-August.

Erasing half of August's dramatic gold price rebound already this week, bullion in the London market fell to $4327 per troy ounce, down 7.8% from last Tuesday's 15-week high.

Silver prices meantime sank to $64.28 per ounce in London's spot market, losing nearly $7 per ounce from Friday's new 10-week peak - touched just before US Fed leader Kevin Warsh gave his first Jackson Hole central-banking symposium speech as chairman, vowing to target 2.0% inflation on the PCE measure, almost half the current pace.

Brent crude oil today hit 1-week highs, costing one-third more than this time last year close to $93 per barrel, as the weekend's US airstrikes on Iran were met with retaliatory strikes on US sites across the Middle East.

"We're going to hit them hard," vowed US President Trump overnight.

The price of wheat also jumped again, hitting the highest since spring 2023 after Russia rejected a pause on attacking Black Sea shipping and struck Ukrainian ports.

"Government bond yields are surging across the world," says economist Thomas Pugh at tax consultancy RSM UK.

"The energy shock and the threat of rising inflation are important factors. But there is much more to it than that, especially for longer-dated bonds...[because] governments are still spending as if interest rates were near zero."

Iranian President Masoud Pezeshkian today thanked Russia's President Vladimir Putin for his support during the US-Iran war so far, speaking at the Shanghai Cooperation Organization summit in Kyrgyzstan.

The event also kicks off what Bloomberg calls the "busiest travel schedule in more than seven years" for China's leader Xi Jinping, scheduled to visit Egypt and then India − before meeting Trump in Washington later this month − "in a bid to convince nations that Beijing offers better global leadership than the US."

With gold and silver falling as interest rates rose, Asian stock markets were mixed and European bourses fell, with the EuroStoxx 600 down 0.3% to the lowest since end-July despite new PMI survey data showing the strongest activity growth for manufacturers in world No.3 economy Germany in more than 4 years.