Gold Steadies on Mideast De-escalation

Gold prices edged lower to $4,120 an ounce on Tuesday as rising oil prices stoked inflation concerns, prompting investors to reassess the US interest rate outlook ahead of next week’s Federal Reserve meeting. Brent crude climbed to a five-month high amid renewed Houthi attacks and reports of vessel strikes in the Gulf, heightening concerns over regional supply disruptions and reinforcing expectations of tighter monetary policy. Although the Fed is widely expected to leave rates unchanged next week, investors will closely scrutinize its forward guidance for clues on a potential December hike. Markets now price in a more than 90% chance of a rate increase, according to the CME FedWatch Tool. While gold is traditionally viewed as an inflation hedge, higher interest rates reduce its appeal relative to yield-bearing assets.

Gold prices fell toward $4,100 per ounce on Tuesday, marking a third straight session of declines as elevated oil prices heightened inflation concerns and reinforced expectations of tighter monetary policy. The metal also faced pressure from a stronger US dollar and rising bond yields. Oil prices remained firm amid ongoing hostilities in the Middle East and Eastern Europe, while Iran continued to assert its control over the Strait of Hormuz. Meanwhile, the US Federal Reserve is widely expected to keep interest rates unchanged next week, with markets pricing in roughly a 94% probability of a rate hike in December. Elsewhere, the European Central Bank is expected to implement at least one additional 25-basis-point rate increase this year to address persistent inflationary pressures. Bank of Japan Governor Kazuo Ueda also noted that underlying inflation was “quite close” to the central bank’s 2% target, signaling the possibility of further monetary tightening.

Gold prices hovered around $4,150 an ounce on Monday as investors assessed easing oil prices and awaited next week’s Federal Reserve meeting. Oil retreated from a five-month high after US President Donald Trump eased sanctions and tariffs on Russia, raising hopes of increased fuel supplies and easing inflation pressures. Recent US CPI and PPI data showed stronger-than-expected inflation, partly driven by higher gasoline costs. Investors are now awaiting the Fed’s policy decision and US PCE inflation data, the central bank’s preferred inflation gauge. According to CME’s FedWatch Tool, markets see a 15% chance of a rate hike this month, while the probability of a December increase stands at 89%. Elsewhere, the European Central Bank is likely to deliver at least one more 25-basis-point rate hike this year to combat persistent inflationary pressures. While gold is considered an inflation hedge, higher interest rates tend to pressure the non-yielding metal.