News Maker 23

Global gold prices remained relatively stable during Wednesday's trading (Oct 14) following declines in the previous two sessions. Gold traded around US$4,155 per troy ounce, recovering slightly after a 0.8% drop over the prior two days. This movement followed statements from US Federal Reserve officials that offered some relief to the market. Although the possibility of an interest rate hike remains, investors are beginning to consider that monetary tightening policies may not persist for an extended period.

New York Federal Reserve President John Williams stated that one additional rate hike is still necessary this year. However, he projected that there would be no need for further rate hikes in 2027. These remarks helped alleviate investor concerns regarding overly aggressive Fed policies. US Treasury yields also declined following the comments, providing support for gold; when bond yields fall, gold tends to become more attractive as the opportunity cost of holding a non-interest-bearing asset decreases.

Meanwhile, escalating geopolitical tensions in the Middle East are influencing market sentiment. A series of attacks in the region has raised concerns about global energy supply disruptions and pushed Brent crude oil prices above US$106 per barrel. Rising oil prices could increase production and transportation costs, potentially intensifying inflationary pressure. This situation poses a challenge for the Fed, as persistently high inflation could prompt the central bank to maintain high interest rates for longer.

Investor attention is now focused on the release of US Consumer Price Index (CPI) data scheduled for Wednesday. This data will serve as a crucial indicator of whether inflationary pressure is beginning to ease or rising once again. Currently, market participants estimate that the probability of an interest rate hike at the Federal Reserve's October meeting remains relatively low, whereas the likelihood of a hike in December stands at approximately 90%. Ahead of the data release, spot gold edged down 0.1% to US$4,157.37 per troy ounce at 08:05 Singapore time, while the Bloomberg Dollar Index held steady after previously declining 0.2%.

Looking ahead, gold price movements are expected to be heavily influenced by US inflation data and the market's reaction to the Fed's policy stance. If the CPI indicates lower-than-expected inflation, the likelihood of an interest rate hike could diminish—potentially weakening the US dollar and bond yields while creating room for gold to appreciate. Conversely, if inflation exceeds expectations, the US dollar could strengthen, placing additional pressure on the precious metal. Given these conditions, gold is likely to remain volatile in the short term as investors await clarity on the interest rate trajectory and developments regarding global geopolitical tensions.