Gold held near $4,000 in Asian trading on Monday after a 4.1% weekly drop. Its recent losses are tied to a surge in oil prices, and investors now look to this week's Federal Reserve meeting for guidance on December.
Gold traded 0.2% higher at $4,005.41 an ounce in Asian trading on Monday after falling more than 4% last week. Investors are assessing how elevated energy prices affect inflation and monetary policy before the Fed meets this week.
The metal slipped below $4,000 on Friday for the first time since mid-July.
Oil surge drives the losses
The recent losses stem from a jump in oil prices amid elevated Middle East conflict. Brent crude rose 6.2% last week to its highest weekly close since mid-2022, then eased on Monday amid diplomatic efforts to reduce regional tensions.
Higher energy costs risk prolonging inflationary pressures and limiting the scope for central banks to ease. Gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, but elevated interest rates raise the opportunity cost of holding a non-yielding metal.
Fed guidance on December in focus
Investors widely expect the Fed to hold rates at its October 27-28 meeting, but attention is shifting to guidance on the December outlook. Markets were pricing in about a 78% probability of a rate hike in December, according to CME FedWatch data.
Meanwhile, the 10-year U.S. Treasury yield stood near 5%, keeping pressure on bullion, while uncertainty over the Middle East conflict continued to support demand for safe-haven assets. The U.S. personal consumption expenditures price index, due October 29, will offer another test of the inflation outlook.
Technical levels to watch
Separately, an Investing.com analysis put gold futures near $4,010 after an intraday low of approximately $3,989.10. It identifies first support at $3,981 and $3,955, with initial recovery hurdles at $4,042 and $4,077.
The analysis says a sustained move above $4,077 would strengthen the bullish case, while it describes its levels as reference points rather than guaranteed reversal points.
Sources: Commodities & Futures News, Commodities Analysis & Opinion
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