Gold prices slide as oil rally reinforces higher-for-longer rate outlook
Precious metals come under pressure as rising oil prices revive inflation concerns and keep investors focused on the prospect of elevated borrowing costs. Gold falls more than 1% on Thursday, with markets also looking ahead to next week's Federal Reserve meeting and fresh U.S. inflation data.
Highlights
- Traders price in a 90% chance of a Fed rate hike in December, reducing gold's appeal by raising opportunity costs for non-yielding assets.
- Spot gold targets the October 14 low of $4,073 per ounce, with key resistance at $4,135 and potential upside to $4,150–$4,169.
- Spot silver drops 2.6% to $56.44 per ounce, platinum slides 2.1% to $1,594.25, and palladium falls 2.6% to $1,059.05.
Rate outlook and wider metals market
According to Reuters, traders see just a 16% chance of a rate hike at the Fed's October 27-28 policy meeting next week, but they are pricing in a 90% likelihood of an increase in December, according to CME's FedWatch Tool. Markets are also awaiting next week's Personal Consumption Expenditures data, a key gauge watched closely by the central bank as it targets a 2% inflation rate.Wong says investors expect elevated interest rates at both the short and long ends of the curve, reducing gold's appeal by raising the opportunity cost of holding a non-yielding asset. Reuters technical analyst Wang Tao says spot gold still targets the October 14 low of $4,073 per ounce, with resistance at $4,135 and a break above that level potentially opening the way to the $4,150 to $4,169 range.
Among other metals, spot silver drops 2.6% to $56.44 per ounce, platinum slides 2.1% to $1,594.25 and palladium falls 2.6% to $1,059.05.
In our earlier article, we covered how U.S. Treasury yields reacted to a hotter-than-expected September CPI report, as markets recalibrated expectations ahead of the Fed’s next policy decision. We noted that despite the inflation surprise, bond yields eased as investors weighed incoming macro data and changing views on credit conditions—highlighting how rate expectations can quickly shift across markets.
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