Gold dips for fourth session as oil rally fans inflation concerns
The Federal Reserve will skip rate hikes for October, say nearly all economists polled by Reuters
[BENGALURU] Gold prices eased for a fourth session on Wednesday (Oct 21) as higher oil prices stoked inflationary concerns, while investors looked ahead to next week’s US Federal Reserve policy meeting for clues on the future path of interest rates.
Spot gold was down 0.2 per cent at US$4,118.18 per ounce by 0319 GMT, while US gold futures for December delivery dropped 0.2 per cent to US$4,136.20.
“The metal could remain under some pressure as crude prices returned to the upside, keeping inflationary pressures in place and reinforcing hawkish monetary policy expectations,” said Bas Kooijman, CEO and asset manager of DHF Capital.
Oil prices edged higher on Wednesday on Middle East supply concerns, with traders wary of Red Sea shipping risks and threats to oil infrastructure in Saudi Arabia.
“At this point, if some of these rate hikes that the markets have baked in for next year fall out of the forecast or at least downgrade in their likelihood, then that’s likely to send gold higher,” said Ilya Spivak, head of global macro at Tastylive.
The Fed will skip raising interest rates in October and deliver a hike in December, according to nearly all economists polled by Reuters, as policymakers signal patience even as stubborn inflation argues for a tougher response.
Expectations of a rate hike at the central bank’s Oct 27 to 28 policy meeting are as low as 16 per cent, while traders still see a 90 per cent chance of a hike in December, according to CME’s FedWatch Tool.
Higher interest rates typically weigh on gold prices because they increase the opportunity cost of holding the metal, which does not pay interest.
The US dollar index stabilised after recent losses, further reducing demand for bullion.
Markets are also waiting for the US Personal Consumption Expenditures data next week, the Fed’s preferred gauge to monitor its 2 per cent inflation target.
Among other metals, spot silver slid 0.9 per cent to US$57.44 per ounce, platinum dropped 0.6 per cent to US$1,638.61 and palladium slipped 1.1 per cent to US$1,090.84. REUTERS
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