Gold market extends losses as oil-driven inflation concerns pressure prices

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Gold extends losses on inflation

Highlights

Spot gold declines 0.2% to $4,118.18 per ounce, with U.S. December futures down 0.2% to $4,136.20 amid persistent inflation concerns driven by rising oil prices.
Traders assign a 16% likelihood for a Federal Reserve rate hike at the October 27-28 meeting and a 90% probability in December, pressuring gold due to higher opportunity costs.
Spot silver falls 0.9% to $57.44 per ounce, platinum drops 0.6% to $1,638.61, and palladium slips 1.1% to $1,090.84, reflecting broad pressure on precious metals.

Oil prices and rate outlook weigh on bullion

As reported by Reuters, spot gold is down 0.2% at $4,118.18 per ounce by 0319 GMT, while U.S. gold futures for December delivery fall 0.2% to $4,136.20.

Bas Kooijman, CEO and asset manager of DHF Capital S.A., says the metal could remain under pressure as crude prices move higher again, keeping inflationary pressures in place and reinforcing hawkish monetary policy expectations. Oil prices edge up on Wednesday on Middle East supply concerns, with traders watching Red Sea shipping risks and threats to oil infrastructure in Saudi Arabia.

Ilya Spivak, head of global macro at Tastylive, says gold could move higher if some of the rate hikes currently priced in by markets for next year are removed from forecasts or seen as less likely.

Federal Reserve signals remain central for markets

The Federal Reserve is expected to leave interest rates unchanged this month and deliver a hike in December, according to nearly all economists polled by Reuters, as policymakers signal patience even while persistent inflation supports a tougher stance.

Market expectations for a rate increase at the central bank's October 27-28 policy meeting stand at 16%, while traders still see a 90% chance of a December hike, according to CME's FedWatch Tool. Higher interest rates typically weigh on gold because they raise the opportunity cost of holding a non-yielding asset, while the U.S. dollar index stabilizes after recent losses and further reduces demand for bullion.

Markets are also waiting for next week's U.S. Personal Consumption Expenditures data, the Fed's preferred measure for tracking its 2% inflation target. Among other precious metals, spot silver slides 0.9% to $57.44 per ounce, platinum drops 0.6% to $1,638.61 and palladium slips 1.1% to $1,090.84.

In our earlier article on UBS’s forecast for a longer Federal Reserve tightening cycle, we explained why the bank expects additional rate hikes beyond December, including a possible move in March 2027 amid persistent inflation pressures. We also noted that futures pricing had shifted toward a “higher-for-longer” path, reinforcing expectations of elevated borrowing costs and tighter financial conditions.

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