Gold edges up as oil price falls, Fed decision awaited
Spot gold rose 0.4 per cent to US$4,010.51 per ounce on Monday, driven by softer oil prices calming inflation fears. Markets now await the US Federal Reserve's policy decision on 27-28 October, with traders largely expecting rates to remain unchanged this week.
Gold edged higher on Monday as softer oil prices tempered inflation concerns, while investors awaited the Federal Reserve's policy decision later this week. Spot gold rose 0.4 per cent to US$4,010.51 per ounce by 0544 GMT, after hitting its lowest level since mid-July in the previous session. Bullion posted a 4 per cent weekly fall on Friday, its steepest weekly decline since June. US gold futures for December delivery gained 0.4 per cent to US$4,024.00.
"The jump that we've seen is mostly symptomatic of the kind of relief provided by a lower oil price, but one that could easily be capped as markets position for the FOMC decision in a couple of days' time," said Kyle Rodda, senior financial market analyst at Capital.com. "Gold will continue to trade as a function of interest rate expectations and geopolitical risks."
Oil prices fell on Monday after surging to near six-month highs last week, amid hopes of easing hostilities between the United States and Iran, although ongoing attacks on Saudi Arabia by Yemen's Houthis kept supply concerns in focus. Qatari mediators were in Tehran on Sunday to help de-escalate regional tensions in coordination with the United States, an official briefed on the situation told Reuters.
Markets await the Fed's policy meeting on 27-28 October. The US Personal Consumption Expenditures data, a key gauge closely watched by the central bank as it targets a 2 per cent inflation rate, is due the next day. Traders largely expect the central bank to leave rates unchanged this week, while expectations for a hike in December are at 77 per cent, according to the CME's FedWatch Tool.
Although gold is typically seen as an inflation hedge, higher interest rates tend to diminish non-yielding bullion's appeal to investors. Meanwhile, US business activity slowed modestly in October, though robust demand allowed companies to raise prices for goods and services, a sign that inflation could increase further and remain persistently high in the coming months.
Among other metals, spot silver rose 0.6 per cent to US$54.19 per ounce, platinum dropped 0.2 per cent to US$1,548.30 and palladium gained 0.2 per cent to US$1,046.25.