Bullion prices edge lower in early Asian trading as investors position ahead of the U.S. Federal Reserve's policy decision next week. Attention is also turning to upcoming U.S. inflation data, which could shape expectations for whether rates stay on hold in October and rise again in December.
Highlights
- Spot gold declines 0.3% to $4,126.84 per ounce and U.S. gold futures fall 0.3% to $4,146.00, as traders await Fed policy signals.
- CME's FedWatch Tool shows traders pricing in an 83% chance of no Fed rate change next week and a 94% probability for a December hike.
- BOJ Governor Kazuo Ueda's statement that inflation is near 2% target raises expectations for further rate hikes, impacting metals sentiment.
Fed meeting and inflation data in focus
As reported by Reuters, spot gold falls 0.3% to $4,126.84 per ounce by 0102 GMT, while U.S. gold futures for December delivery drop 0.3% to $4,146.00.Market attention is shifting to the Fed's October 27-28 policy meeting and next week's U.S. Personal Consumption Expenditures data, a key inflation gauge watched by the central bank as it targets 2% inflation. The U.S. central bank in September raises its benchmark overnight interest rate by 25 basis points to the 3.75%-4.00% range.
According to CME's FedWatch Tool, traders price in an 83% chance that the central bank leaves rates largely unchanged next week, while expectations for a December hike stand at 94%. Higher interest rates typically weigh on gold because they raise the opportunity cost of holding a non-yielding asset.
Broader policy signals weigh on metals
Comments from Bank of Japan Governor Kazuo Ueda also add to the policy focus after he says underlying inflation is "quite close" to the central bank's 2% target, with strong global AI demand adding to inflationary pressure from a tight job market. His remarks signal scope for further rate increases.On the geopolitical front, Yemen's Iran-aligned Houthis say on Monday that they carry out several attacks against Saudi energy, airport and military targets.
Among other precious metals, spot silver slides 0.7% to $56.69 per ounce, platinum is steady at $1,639.65 and palladium falls 0.7% to $1,112.08.
In our earlier article on UBS’s outlook for a longer Fed tightening cycle, we explained why the bank expects additional rate hikes after September’s inflation data reinforced “higher-for-longer” policy risks. We also noted that market pricing via CME FedWatch had shifted toward further tightening, as investors weighed persistent inflation drivers such as AI-related demand and potential supply disruptions.
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