Gold rebounded on Monday after a 4.1% weekly slide, as slightly lower oil prices eased some inflation worries. Investors now look to the Fed's October 27-28 meeting and its guidance on a possible December rate hike.
Gold prices bounced on Monday after falling more than 4% last week, as a dip in energy prices eased some inflation worries. Investors are looking ahead to a Federal Reserve rate decision later this week.
Spot gold traded 0.4% higher at $4,010.70 an ounce by 07:19 ET, while gold futures gained 0.4% to $4,024.82 an ounce. On Friday, the metal slipped below the $4,000 level for the first time since mid-July. Bullion slid 4.1% last week.
Oil climb contributed to gold's recent losses
Gold's recent losses have been driven in part by a sharp climb in oil prices, which fueled fears of energy-induced inflation pressures. Brent crude edged down marginally on Monday thanks to efforts to reduce Middle East tensions. Last week, the global benchmark rose 6.2%, notching its highest weekly close since mid-2022.
Higher energy costs risk prolonging inflationary pressures and limit the scope for central banks to ease monetary policy. Elevated interest rates, in turn, can increase the opportunity cost of holding non-yielding assets like gold, making interest-bearing assets more attractive.
Fed guidance on December in focus
Investors are widely expecting the Fed to keep interest rates unchanged at the end of its October 27-28 meeting, but attention is shifting to policymakers' guidance on the outlook for December. Markets were pricing in about a 78% probability of a rate hike in December, according to CME FedWatch.
Analysts at ING predicted that Fed Chair Kevin Warsh's press conference on Wednesday will likely be brief, given his past reticence to provide markets with forward guidance. The ING analysts wrote that they expect his message to reflect "officials currently thinking that they probably have more work to do".
Recent U.S. consumer and producer inflation readings came in stronger than expected. The U.S. personal consumption expenditures price index, due on October 29, will provide another test of the inflation outlook.
Source: Commodities & Futures News
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