Gold edges lower as traders weigh oil prices and Fed rate path

[SINGAPORE] Gold slipped as investors weighed the risk of a series of further US Federal Reserve rate hikes, even as benchmark oil futures extended a decline.

Bullion fell as much as 1.3 per cent to below US$4,325 an ounce. Several Fed policymakers are due to speak publicly this week after voting unanimously last week to raise interest rates.

Higher rates generally make the metal less attractive to investors as it does not pay interest.

Chicago Fed president Austan Goolsbee warned that the US central bank cannot ignore repeated and persistent supply shocks, and must respond in a way that may cause economic hardship.

“Supply shocks have come more frequently, hit harder and lasted longer,” he said on Monday (Sep 21) at an event in London. “And once supply shocks to inflation become persistent, some of the logic behind ‘looking through’ no longer holds.”

Meanwhile, there was heavy selling in the London bullion market auction, with four times as much gold offered for sale as buyers wanted to purchase, pushing the price lower, according to traders.

The Fed’s last rate increase was a bid to cool inflation that has not fallen below the 2 per cent target in more than five years. Minneapolis Fed president Neel Kashkari said on Sunday that inflation remains too high and pressures have broadened beyond the oil-price shock of the Iran war. 

New York Fed president John Williams is due to speak on Tuesday at the 2026 US Treasury Market Conference in New York.

“We’ve largely moved past the Fed independence narrative following Warsh’s hike, meanwhile the forward guidance on rates came in broadly as expected”, leaving gold with “no real narrative and relatively few fresh catalysts in the near term”, said Justin Lin, an analyst at Global X ETFs.

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“In this lull, gold will likely trade more closely off movements in oil prices and the broader inflation outlook.”

Oil fell below US$100 a barrel on Monday, with Brent crude poised for the longest run of declines since June, as robust flows through the Strait of Hormuz and diplomacy around the US-Iran war tamed a recent rally.

Spot gold was down 0.7 per cent at US$4,349.96 an ounce at 12.37 pm in New York. Silver was little changed at US$66.22 an ounce.

Platinum and palladium edged higher. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1 per cent. BLOOMBERG