Gold falls to July low as inflation concerns weigh before Fed meeting
Bullion slips as much as 1.2% to trade around US$3,975 an ounce
GOLD fell to the lowest since July as renewed strength in energy prices and weakening US consumer sentiment reinforced inflation concerns just days before the US Federal Reserve’s next policy meeting.
Bullion slipped as much as 1.2 per cent to trade around US$3,975 an ounce. Brent oil rose above US$115 a barrel as a flare-up in Middle East violence threatened global supplies.
US consumer sentiment edged down to a five-month low in October as high prices and rising interest rates depressed morale.
“Gold is being weighed down by concerns around oil prices, rates and the Fed outlook,” said Ryan McKay, senior commodity strategist at TD Securities.
“At the margin, flows have also been negative, with heavy CTA selling this week adding to the pressure.”
The precious metal is on course for a 4 per cent weekly drop, the biggest since early June.
It is “caught in the risk-off flush”, said McKay, as renewed tensions in the Middle East sent energy prices higher again, while a rotation out of artificial intelligence-related stocks pushed investors towards the safety of US bonds.
The resulting rise in Treasury yields added pressure on gold, which typically struggles when yields climb.
While traders priced in just a 10 per cent chance of a quarter-point rate increase at the Fed’s meeting next week, higher oil prices have also prompted bets on another hike in December.
“We remain cautious in the near term, particularly as gold has struggled to respond positively to the recent decline in yields,” said Christopher Wong, an analyst at OCBC.
“The latest sell-off suggests that broader risk reduction and lingering inflation concerns may be outweighing the relief from lower yields.”
One part of the market where gold’s weakness has not shown up is exchange-traded fund (ETF) holdings. Metal has flowed into gold ETFs tracked by Bloomberg for each of the last 14 weeks, marking a stark contrast to the price performance.
“Longer-term investors continue to accumulate gold through ETFs as protection against fiscal instability, geopolitical risks and currency debasement,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, wrote in a note.
“Short-term macro-focused traders remain sensitive to interest rate expectations, currency movements and technical signals.”
Spot gold fell 0.6 per cent to US$3,999.05 an ounce as at 11.23 am in New York, while silver fell 0.83 per cent to US$54.12 an ounce.
Platinum slipped while palladium rose. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed. BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
