Gold prices edge higher as softer oil tempers inflation worries ahead of Fed decision

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Gold prices edge higher before Fed

Highlights

Spot gold rises 0.4% to $4,010.51, rebounding after a 4% weekly decline, as softer oil prices ease inflation worries before the Fed decision.
Oil prices drop after recent highs amid de-escalation efforts between the United States and Iran, while ongoing Houthi attacks on Saudi Arabia maintain supply risks.
Traders expect the Federal Reserve to hold rates steady this week, with a 77% probability of a December hike, as U.S. business activity slows but inflation pressures persist.

Market moves before Fed meeting

As reported by Reuters, spot gold rises 0.4% to $4,010.51 an ounce by 0544 GMT, after touching its lowest level since mid-July in the previous session.

U.S. gold futures for December delivery gain 0.4% to $4,024.00. Bullion records a 4% weekly fall on Friday, its steepest weekly decline since June.

Kyle Rodda, senior financial market analyst at Capital.com, says the rebound mainly reflects relief from lower oil prices, though gains could remain capped as markets position for the Federal Open Market Committee decision in the coming days. He adds that gold continues to trade largely on interest-rate expectations and geopolitical risks.

Oil, inflation and broader metals impact

Oil prices fall on Monday after climbing to near six-month highs last week, amid hopes of easing hostilities between the United States and Iran. At the same time, ongoing attacks on Saudi Arabia by Yemen's Houthis keep supply concerns in focus.

Qatari mediators are in Tehran on Sunday to help de-escalate regional tensions in coordination with the United States, an official briefed on the situation tells Reuters. Markets are also awaiting the Fed's October 27-28 policy meeting, with U.S. Personal Consumption Expenditures data due the next day.

Traders largely expect the central bank to leave rates unchanged this week, while expectations for a December hike stand at 77%, according to CME's FedWatch Tool. While gold is often viewed as an inflation hedge, higher interest rates tend to reduce the appeal of non-yielding bullion.

Separate U.S. data shows business activity slows modestly in October, although strong demand allows companies to raise prices for goods and services, indicating inflation could strengthen further and remain elevated in the coming months. Among other precious metals, spot silver rises 0.6% to $54.19 an ounce, platinum falls 0.2% to $1,548.30 and palladium gains 0.2% to $1,046.25.

In our earlier coverage of the Federal Reserve’s policy messaging debate ahead of the next FOMC meeting, we explained how differing views among officials on how openly to communicate policy were directly shaping market pricing for another rate hike. We noted that mixed signals alongside firm inflation data kept expectations volatile, while clearer comments from key policymakers helped temper the most aggressive tightening bets.

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