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Reuters reported that spot gold prices slid 1.1 percent to $4,094.90 per ounce by early European trading hours, marking the lowest level since October 14. US gold futures for December delivery fell 0.9 percent to $4,111.40. The decline comes as markets assess the impact of higher energy costs on inflation and monetary policy.
Kelvin Wong, a senior market analyst at OANDA, said in the report that if oil prices continue to rise, inflation expectations could increase, raising the likelihood of higher interest rates over the longer term and weighing on gold. Wong added that investors anticipate elevated interest rates at both the short and long ends of the curve. This dynamic reduces gold’s appeal by increasing the opportunity cost of holding the non-yielding asset.
The report noted that oil prices rose on Thursday following additional attacks by the Houthis in Saudi Arabia, with Brent crude holding near five-month highs above $110 a barrel in recent sessions according to energy market data. This prompted the United States to order some diplomats and family members to leave its missions in the Kingdom. Such developments have heightened concerns over potential supply disruptions in the energy market.
Although stubborn inflation driven by high energy prices has strengthened the argument for tighter monetary policy, Federal Reserve policymakers are expected to remain patient in the immediate term. Traders see just a 16 percent chance of a rate hike at the Fed’s October 27-28 policy meeting next week. They are pricing in a 90 percent likelihood of an increase in December, according to CME’s FedWatch Tool.
Markets are also awaiting next week’s Personal Consumption Expenditures data, which serves as a key inflation gauge closely monitored by the central bank in its pursuit of a 2 percent target. A Reuters poll of economists indicated that the Fed will likely skip raising rates this month but deliver a hike in December. This outlook reflects a cautious approach despite persistent price pressures.
Technical analysis in the Reuters dispatch suggested that spot gold still targets the October 14 low of $4,073 per ounce. Morningstar data showed the metal down more than 4 percent year-to-date as of mid-October. Broader market participants continue to monitor developments in the Middle East that could further influence commodity prices and policy expectations.
