Gold eases as elevated oil prices keep inflation risks in focus
GLD•Spot gold fell 0.3% to $4,128.92 an ounce as firmer oil prices heightened inflation concerns ahead of next week’s Federal Reserve meeting. Brent crossed $110 a barrel on Monday, while traders largely expect the Fed to leave rates unchanged next week.
1. Oil weighs on gold
Spot gold fell 0.3% to $4,128.92 per ounce by 0621 GMT, while U.S. gold futures for December delivery dropped 0.3% to $4,148.50. Brent crossed $110 a barrel on Monday, its highest level since May 20, as traders priced in geopolitical risk after Yemen’s Houthis said they had attacked Saudi energy, airport and military targets.
2. Rates in focus
Higher energy prices can raise expectations that the Fed will keep interest rates higher for longer to contain inflation, diminishing gold’s appeal by increasing the opportunity cost of holding it. Recent Fed comments have tempered expectations of a rate hike at the October 27-28 meeting, though traders see a 92% chance of a hike in December, according to CME’s FedWatch Tool. A Capital.com analyst said an unchanged rate decision could initially support gold.
