Gold Rebounds, with the Fed as the Deciding Factor

Gold prices strengthened in Monday’s trading session, following a decline of more than 4% over the previous week. Spot gold rose 0.4% to approximately US$4,010.70 per troy ounce, while gold futures climbed 0.4% to US$4,024.82. This recovery coincided with a decline in energy prices, which helped ease inflation concerns ahead of the Federal Reserve’s upcoming decision.

Previously, gold had come under pressure after a sharp surge in oil prices fueled fears that high energy costs would keep inflation elevated. Brent crude eased slightly on Monday, following a 6.2% jump last week—which marked its highest weekly close since mid-2022.

High energy prices could limit the central bank’s room to loosen monetary policy, as they threaten to sustain inflationary pressure. This presents a challenge for gold, as high interest rates increase the opportunity cost of holding non-yielding assets.

Investors are now awaiting the Federal Reserve’s decision, due following its October 27–28 meeting. While the Fed is expected to keep interest rates unchanged, the market will be closely watching for signals regarding the December meeting. Currently, market participants estimate a roughly 78% probability of an interest rate hike by the end of the year.

Attention is also focused on the U.S. Personal Consumption Expenditures (PCE) price index, scheduled for release on October 29. Recent consumer and producer inflation data—which came in higher than anticipated—have kept the market on high alert. Should inflationary pressures intensify, expectations for interest rate hikes could rise, potentially capping any recovery in gold; conversely, softer data could pave the way for further gains.