Gold Holds Near Three-Month Low as Investors Await Federal Reserve Decision
Gold prices were little changed during Asian trading on Monday after recording a weekly decline of more than 4%, as investors assessed the implications of higher energy costs for inflation and US monetary policy ahead of the Federal Reserve’s October meeting.
Spot gold rose 0.2% to $4,005.41 per ounce by 02:28 ET (06:28 GMT), while US gold futures advanced 0.3% to $4,017.45 per ounce.
The metal had fallen below $4,000 on Friday for the first time since mid-July, contributing to a weekly loss of 4.1%. Prices remained near their lowest levels in approximately three months.
Market participants are monitoring the relationship between energy prices, inflation expectations and interest rates, alongside developments in the Middle East.
Higher Oil Prices Influence Gold Market Expectations
Gold’s recent decline followed an increase in crude oil prices associated with the continuing conflict in the Middle East.
Brent crude rose 6.2% during the previous week, reaching its highest weekly closing level since mid-2022. Prices subsequently eased on Monday following reports of diplomatic initiatives intended to reduce regional tensions.
Higher energy costs can contribute to inflation through increased transportation, production and distribution expenses.
Persistent inflation may limit the ability of central banks to reduce borrowing costs and could lead policymakers to maintain restrictive monetary conditions for longer.
Although gold is commonly used by investors as a hedge against inflation and geopolitical uncertainty, it does not generate interest income.
When interest rates and government bond yields remain elevated, interest-bearing assets can become more attractive relative to bullion.
This relationship has been a factor in recent gold market movements, alongside demand for assets perceived as relatively secure during periods of international uncertainty.
Federal Reserve Expected to Leave Rates Unchanged
Investors widely expect the Federal Reserve to maintain its benchmark interest rate at the policy meeting scheduled for 27–28 October.
Attention is therefore shifting towards the central bank’s assessment of inflation and its guidance on potential policy changes later in the year.
According to CME FedWatch data, financial markets were pricing in approximately a 78% probability of an interest rate increase at the Federal Reserve’s December meeting.
The expectation follows recent US consumer and producer inflation reports that exceeded forecasts.
The data have contributed to concerns that inflationary pressures could remain persistent, even as economic activity continues to expand.
A decision to maintain rates in October would not necessarily indicate that the Federal Reserve had concluded its monetary tightening cycle.
Investors will be examining policymakers’ comments for indications of how inflation, economic growth and financial conditions could influence subsequent decisions.
US PCE Inflation Data Due on 29 October
The next significant US inflation indicator will be the personal consumption expenditures (PCE) price index, scheduled for publication on 29 October.
The PCE index is the Federal Reserve’s preferred measure of inflation and provides information about changes in prices paid by US consumers.
The release will offer an additional indication of whether inflation is moving towards the central bank’s 2% target.
Investors will assess the data alongside recent consumer and producer price reports, which indicated stronger inflation than expected.
Any change in expectations for future interest rates could influence gold prices through its effect on government bond yields and the US dollar.
US Treasury Yields Remain Near 5%
The yield on the benchmark 10-year US Treasury note remained close to 5%, maintaining pressure on gold through the relative attractiveness of interest-bearing securities.
Higher bond yields increase the opportunity cost of holding assets that do not provide regular income.
However, uncertainty surrounding the duration and economic consequences of the Middle East conflict has continued to support some demand for gold as a safe-haven asset.
These competing influences have contributed to gold trading near the $4,000-per-ounce level following the previous week’s decline.
The direction of prices will remain sensitive to changes in inflation expectations, monetary policy assessments and geopolitical developments.
Silver Steady as Platinum and Copper Decline
Trading across other precious and industrial metals was mixed on Monday.
Silver was broadly unchanged at $53.95 per ounce, while platinum declined 0.6% to $1,543.71 per ounce.
Copper prices also moved lower.
Benchmark copper futures on the London Metal Exchange fell 0.4% to $14,277.33 per tonne, while US copper futures declined 0.2% to $6.49 per pound.
The movements came as commodity markets continued to assess the outlook for economic activity, inflation and international supply conditions.
Gold Investors Focus on Inflation and December Rate Outlook
Gold remained near a three-month low despite a modest increase during Monday’s Asian session.
The metal’s 4.1% weekly decline reflected pressure from higher energy prices, elevated Treasury yields and expectations that US monetary policy could remain restrictive.
The Federal Reserve’s October decision and the publication of September’s PCE inflation data on 29 October will provide further information about the interest rate outlook.
At the same time, developments in the Middle East remain relevant to both energy prices and demand for safe-haven assets.
Gold price