Gold Pares Some Gains After Strong GDP

Gold prices were little changed near $4,000 an ounce on Monday after hitting a more than three-month low of $3,975 on Friday, as falling oil prices eased inflation concerns ahead of this week’s central bank meetings. Oil retreated from last week’s surge but remained near six-month highs amid hopes of easing US-Iran tensions, with potential supply disruptions still posing inflation risks. The Fed is scheduled to announce its rate decision on Wednesday, with policymakers widely expected to hold rates steady following September’s hike. Meanwhile, the probability of another rate increase in December has climbed above 80%, according to the CME FedWatch Tool. Investors also await Thursday’s US PCE inflation data for clues on the rate outlook, while attention is turning to the November 3 US midterm elections. Elsewhere, the ECB and the Bank of Japan are also expected to keep rates unchanged, while the Bank of Canada is widely expected to deliver its first rate hike since 2023.

Gold traded around $4,000 an ounce on Monday, hovering near its lowest level in more than three months as investors weighed escalating geopolitical tensions in the Middle East and prepared for key central bank decisions this week. The Trump administration is weighing whether to pursue a deal with Iran or resume military strikes following next week’s midterm elections, amid growing threats to Americans across the region. Tehran is reportedly ready to retaliate, potentially targeting Israel and the UAE. The Middle East conflict has driven energy prices sharply higher this year, fueling inflation concerns and strengthening expectations of higher interest rates, which tend to pressure non-yielding assets such as gold. Meanwhile, the Federal Reserve is widely expected to leave interest rates unchanged this week, before potentially raising them in December. Central banks in the Eurozone and Japan are also anticipated to maintain their current interest rates.

Gold prices fell below $4,000 an ounce on Friday, hitting their lowest level since mid-July and putting the precious metal down almost 4% for the week, as rising oil prices strengthened expectations that US interest rates will remain higher for longer. Brent crude surged to a four-year high after Houthi attacks in Saudi Arabia heightened concerns over further energy supply disruptions. Meanwhile, recent US data showed consumer and producer inflation rising more than expected, largely driven by higher energy costs, reinforcing concerns over persistent inflationary pressures. Despite this, Federal Reserve officials are widely expected to leave interest rates unchanged at their October 27–28 meeting. Markets currently price in just a 10% chance of a rate hike next week, compared with odds of around 80% for December, according to CME’s FedWatch Tool. Investors now await US PCE inflation data due October 29 for further clues on progress towards the Fed’s 2% inflation target.