Gold edges down as traders monitor oil prices, Fed rate outlook

[SINGAPORE] Gold dipped from a one-week high as traders assessed swings in oil prices while awaiting fresh clues to the US Federal Reserve’s rate path.

Bullion traded below US$4,200 an ounce, reversing earlier gains made in Asian trading hours. Brent crude futures climbed to a two-week high amid a crumbling Russia-Ukraine “energy ceasefire” and a new round of Houthi attacks in Saudi Arabia.

Gold is down by about 20 per cent since the US-Iran war started in late February as disruptions to global energy supplies quickened inflation and prompted central bank tightening. Higher rates are typically a headwind for the non-yielding precious metal. 

Still, gold has mostly held above US$4,000, in part due to robust inflows into gold-backed exchange-traded funds and accelerated purchases by the People’s Bank of China. 

The metal is caught between between strong structural investment and central bank demand on one side and elevated bond yields and tighter monetary policy expectations on the other, said Manav Modi, a commodities analyst at Motilal Oswal Financial Services. 

“The macro backdrop remains challenging as persistent inflationary pressures continue to keep additional Fed tightening on the table, supporting Treasury yields and maintaining pressure on real rates,” he said.

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The planned appearance by Fed chairman Kevin Warsh on Thursday (Oct 15) in a discussion at the International Monetary Fund’s annual meeting in Bangkok may provide insight into the central bank’s thinking.

Traders are also waiting for several economic releases including US inflation data this week. 

Spot gold lost 0.7 per cent to US$4,167.14 an ounce as at 3.33 pm New York time, while silver fell 1.1 per cent to US$60.18 an ounce. Platinum and palladium dipped. The Bloomberg Dollar Spot Index was flat. BLOOMBERG