Gold Under Pressure After Fed Keeps Interest Rates Steady

Gold prices weakened after the Federal Reserve maintained interest rates without providing clarity on its next steps. XAU/USD traded at around US$4,029 per troy ounce on Thursday (October 29), as investors awaited the latest inflation data to gauge the likelihood of policy tightening before the end of the year.

The FOMC’s decision to hold interest rates steady was widely anticipated by the market. However, Fed official Kevin Warsh indicated that the central bank plans to reduce the number of meetings that result in policy decisions. The market continues to anticipate an interest rate hike in December, as high energy prices complicate efforts to curb inflation.

Investors are now awaiting the Personal Consumption Expenditures (PCE) data for September—a key inflation indicator closely monitored by the Fed. This data could provide clearer signals regarding the direction of interest rates for the remainder of the year and shape market sentiment toward gold.

Gold also remains vulnerable to sell-offs in the stock market. Concerns regarding the scale of investments in artificial intelligence and their impact on corporate cash flows could prompt investors to sell gold to cover losses in other assets—a dynamic that has kept gold under pressure throughout October.

On the other hand, demand from central banks continues to provide long-term support. Goldman Sachs estimates that central banks purchased approximately 79 tons of gold in August—nearly five times the average monthly purchase volume seen prior to 2022—with China emerging as one of the largest buyers, accounting for about 25 tons.

Sustained demand from central banks could help underpin gold prices in the long term. In the short term, however, the direction of gold remains heavily dependent on PCE data, Fed interest rate expectations, movements in the US dollar, and conditions in global stock markets. (srh)

Source: Newsmaker.id