Gold Holds Decline on Stronger Dollar, Yields

Gold prices dropped below $4,100 an ounce on Thursday, erasing gains from the previous session as renewed tensions in the Middle East pushed oil prices higher and fueled inflation concerns. Crude oil advanced following a drone strike on Saudi Aramco’s Shaybah field that killed two people, while the US ordered some personnel and family members to leave American embassies in Saudi Arabia. Meanwhile, the US Federal Reserve is widely expected to keep interest rates unchanged next week, after Chair Kevin Warsh’s remarks last Friday did little to alter expectations for a pause. However, markets continued to anticipate a potential Fed rate hike in December amid persistent energy-driven inflation. The European Central Bank and the Bank of Japan are also expected to maintain their current interest rates next week. Although gold is traditionally considered a hedge against inflation, its lack of yield makes it less appealing when interest rates rise.

Gold prices hovered around $4,130 an ounce on Wednesday after falling to their lowest level since October 15, as elevated oil prices fueled inflation concerns ahead of next week’s Federal Reserve policy meeting. The metal has remained under pressure in recent weeks amid expectations that further rate hikes could be needed to contain inflation. Although gold is traditionally viewed as an inflation hedge, its lack of yield makes it less attractive when interest rates rise. Markets expect the Fed to hold rates steady on October 28, while pricing in a potential hike in December as policymakers assess persistent price pressures. Recent hotter-than-expected consumer and producer price data have reinforced concerns that surging energy costs are keeping inflation elevated. Meanwhile, UK inflation rose to an 11-month high of 3.5% in September, strengthening expectations that the Bank of England could raise interest rates as soon as November.

Gold prices fell toward $4,100 per ounce on Wednesday, marking a fourth straight session of declines as elevated oil prices intensified inflation concerns and strengthened expectations for interest rate hikes. Oil resumed its upward trend after a diplomat dismissed reports that a deal to end the US-Iran conflict was imminent, although negotiations remain underway. Rising tensions in the Middle East and Eastern Europe, along with increased attacks on tankers in the Strait of Hormuz, further heightened concerns over supply disruptions. Meanwhile, the US Federal Reserve is widely expected to leave interest rates unchanged next week, though markets anticipate a possible rate hike in December. The Bank of Japan and the European Central Bank are also expected to maintain their policy rates next week. Although gold is traditionally considered a hedge against inflation, higher interest rates tend to weaken its appeal compared with interest-bearing assets.