<p>Gold and silver are starting the new week under pressure, extending a correction that has now been running for several weeks.</p>
<p>Gold finished last week around <a href="https://www.moneymetals.com/gold-price">$4,360 an ounce</a>, down roughly 1.6%, while silver fell almost 1.5% to <a href="https://www.moneymetals.com/silver-price">around $65.18</a>. That marked gold’s third consecutive weekly decline.</p>
<p>And selling picked up again Monday morning. Gold slipped below $4,350 in early trading, while silver fell back toward the $63 area as traders braced for what could be another Federal Reserve interest-rate hike this week.</p>
<p>But the strange part is what’s driving the selloff.</p>
<p>The Middle East situation continues to deteriorate, oil has surged above $100 per barrel, inflation remains stubbornly high, and investors are becoming increasingly nervous about both stocks and bonds.</p>
<p>Those would normally sound like pretty good reasons to own gold.</p>
<p>Instead, metals traders are currently focused on the Fed.</p>
<p>Higher oil prices threaten to push inflation higher, dramatically increasing expectations that the Fed will raise rates again at its meeting Wednesday. Higher rates, mainly in the short run, tend to make life more difficult for gold and silver.</p>
<p>So we have the somewhat perverse situation where escalating war, soaring energy prices, and renewed inflation fears are hurting gold because Wall Street believes those problems will force the Fed to tighten monetary policy.</p>
<p>Oil remains at the center of the story. Brent crude traded above $107 Monday morning while U.S. crude hovered above $102 following further disruption to Saudi energy infrastructure and escalating fighting around key Middle Eastern shipping routes.</p>
<p>That is bad news for consumers. Energy ultimately works its way into the cost of transportation, food, manufacturing, and just about everything else.</p>
<p>But beneath the recent weakness in gold, there are some remarkably strong signs of investment demand.</p>
<p>Global gold ETFs attracted roughly $18 billion in August, the second-largest monthly inflow ever recorded. Holdings rose by 121 metric tons to an all-time high.</p>
<p>China’s central bank also added about 650,000 ounces of gold during August, its biggest monthly purchase in nearly three years and its 22nd consecutive month of reported buying.</p>
<p>In other words, while short-term traders are selling gold because they're worried about what Kevin Warsh might say Wednesday, some of the world's largest investors and central banks continue accumulating the metal.</p>
<p>That distinction matters.</p>
<p>Gold and silver can certainly fall further if the Fed delivers another rate hike and signals that still more tightening is coming. Silver, as usual, may be even more volatile.</p>
<p>But rising oil prices, persistent inflation, geopolitical instability, enormous government debt, and continuing central-bank gold purchases haven't gone away.</p>
<p>The Fed can move interest rates around. It can't make those problems disappear.</p>
