Gold Under Pressure Again as US Data Bolsters Expectations of a Fed Rate Hike

Gold prices faced renewed pressure during Friday’s trading session (October 30), falling below the psychological level of US$4,000 per troy ounce. This marks the second consecutive day of decline, following US economic data that revealed robust growth and persistent inflationary pressure—strengthening expectations for a Federal Reserve interest rate hike in December.

Preliminary estimates indicate that the US economy grew by 3.4% in the third quarter, an increase from 2.2% in the previous quarter and surpassing the 3.2% forecast. Meanwhile, the Personal Consumption Expenditures (PCE) price index for September rose by 0.5% month-on-month and 3.6% year-on-year. The core PCE also climbed, up 0.3% month-on-month and 3.1% year-on-year. This combination of solid economic growth and persistent inflation reinforces the outlook for a tighter monetary policy.

Conversely, US Treasury yields weakened as investors sought US government debt as a "safe haven" following disappointing earnings reports from major technology companies. Concerns regarding the massive expenditure on artificial intelligence—which has yet to yield adequate returns—have further fueled market volatility. The US dollar also weakened for the third consecutive day, buoyed by renewed hopes for a diplomatic resolution to the US-Iran conflict; however, this was not enough to lift gold prices.

Geopolitical tensions remain a critical factor. Diplomatic efforts—including a letter from JD Vance to Iranian security officials and a new draft agreement proposed by Qatar—have offered a glimmer of hope for resolving the conflict. Nevertheless, the escalation between the Houthi group and Saudi Arabia, combined with the threat of new attacks by the US and Israel following the US midterm elections, keeps geopolitical risks elevated.

Newsmaker Analysis: In the short term, the fundamentals for gold remain bearish, as strong US economic growth and uncontrolled inflation bolster expectations for a Federal Reserve interest rate hike. Although a weaker dollar and falling Treasury yields may provide room for gold to rebound, such pressure could potentially re-emerge as long as the market maintains expectations for monetary tightening in December. (srh)

Source: Newsmaker.id