Gold Under Pressure Below US$4,100 as Markets Await Fed Signals

The price of gold (XAU/USD) hovered around US$4,019 per troy ounce during Friday’s trading session (October 23), having previously dipped below the psychological US$4,000 level to reach a three-month low. Gold remained under pressure for the second consecutive session, as expectations of high U.S. interest rates and rising oil prices dampened the appeal of the precious metal.

Although several Federal Reserve officials have signaled that there is no immediate urgency to raise interest rates, the market still assigns an approximately 80% probability to a rate hike in December. Inflationary concerns—driven by surging oil prices—have reinforced expectations for tighter monetary policy, acting as a headwind against any recovery in gold prices.

Oil prices remain near one-month highs, fueled by growing risks of supply disruptions in the Middle East. The conflict between Saudi Arabia and the Iran-backed Houthi group has intensified following drone and missile attacks targeting Saudi airports and energy infrastructure. This has sustained a geopolitical risk premium while heightening concerns regarding energy-driven inflation.

Geopolitical risks have further escalated following reports that the U.S. and Israel have prepared military operational plans against Iran, to be considered after the U.S. midterm elections. This situation has bolstered demand for the U.S. dollar as a safe-haven asset; the dollar’s ​​recovery from a three-week low has placed additional downward pressure on gold prices.

Market participants are currently hesitant to open new positions, preferring to wait for clarity regarding the Federal Reserve’s policy direction. The primary focus is on next week’s FOMC meeting, where the Fed is expected to keep interest rates unchanged. Investors will closely scrutinize the policy statement and comments from Fed Chair Kevin Warsh for clues regarding potential policy shifts in December.

Following the Fed’s decision, attention will shift toward U.S. third-quarter GDP data and the PCE Price Index. PCE data is significant as it serves as a key inflation indicator monitored by the Fed. The results can influence the direction of the dollar and interest rate expectations, while also determining whether gold can break back above US$4,000 or continue to face bearish pressure. (srh)

Source: Newsmaker.id