Gold prices dropped following OPEC's decision to reduce oil production and the subsequent hike in Fed interest rates. This suggests that

Key Highlights :

1. Gold prices slid on Monday after a surprise announcement from OPEC+ about a cut to oil output sparked inflation concerns and raised bets of an interest rate hike at the US Federal Reserve’s upcoming May meeting.

2. The opportunity cost of holding non-yielding bullion rises when interest rates are increased to lower inflation.

3. Bullion had risen by nearly 8% last quarter after the recent global banking turmoil drove bets that the Fed would tone down its rate hike approach.

4. Standard Chartered analyst Suki Cooper said in a note that gold buying by central banks might “not be as strong as it was in 2022.”

     Gold prices slid on Monday after a surprise announcement from OPEC+ about a cut to oil output sparked inflation concerns and raised bets of an interest rate hike at the US Federal Reserve’s upcoming May meeting.

     The Organization of Petroleum Exporting Countries (OPEC) said it would reduce its production by 1.2 million barrels per day (bpd) starting in January, in an effort to prop up prices and support global economic growth. The news sent crude prices tumbling, with gold dropping $21.10, or 1.5%, to $1,269.10 an ounce.

     The move comes as a surprise, as many analysts had expected OPEC to maintain its production levels. The announcement raised fears that the oil glut will continue to plague markets, and could lead to higher inflation rates. Inflation has been a growing concern for the Fed, which is expected to raise interest rates next month.

     Gold is traditionally seen as a hedge against inflation, and Monday's move could lead some investors to reassess the metal's value. However, gold is not the only asset to be affected by the OPEC+ announcement. The Dow Jones Industrial Average (DJIA) fell more than 300 points, the S&P 500 dropped 2.5%, and the Nasdaq Composite dropped 3%.

     The move could also have implications for the upcoming US presidential election. Republican candidate Donald Trump has been outspoken about his opposition to the Fed's interest rate hikes, and Monday's news could give him ammunition to argue against them.

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