Gold prices ease as dollar firms before Federal Reserve decision

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Gold prices ease as dollar firms

Highlights

Spot gold falls 0.3% to $4,003.59 an ounce and U.S. gold futures slip 0.5% to $4,016.10 as a firmer dollar weighs on demand.
Markets price just an 11% probability of a Fed rate hike this week and 82% for December, with investors focused on upcoming Fed and inflation data.
Spot silver drops 1.6% to $53.06, platinum slips 1.3% to $1,506.94, and palladium falls 1.8% to $1,030.75 amid broader pressures across precious metals.

Fed outlook keeps pressure on bullion

As reported by Reuters, spot gold is down 0.3% at $4,003.59 an ounce by 0530 GMT, while U.S. gold futures for December delivery are falling 0.5% to $4,016.10. The firmer dollar is limiting demand for greenback-priced bullion among overseas buyers.

Ilya Spivak, head of global macro at Tastylive, said gold is largely consolidating within Friday's range after last week's sharp decline. He said a break below $3,900 could open the way for a deeper fall toward the $3,800 area.

Gold fell below the $4,000 mark for the first time since mid-July last week and recorded a 4% weekly loss, its steepest drop in about four months. Higher energy prices are fueling inflation concerns and reinforcing expectations that U.S. interest rates may rise further.

Federal Reserve policymakers have signaled they are unlikely to raise short-term borrowing costs again this week, but investors remain unconvinced that any pause will last. Markets are awaiting the Fed's policy decision on Wednesday and Personal Consumption Expenditures data on Thursday, the central bank's preferred inflation gauge.

Rate expectations and wider metals market

Traders are pricing in about an 11% chance of a rate increase this week and an 82% chance of a December move, according to CME's FedWatch Tool. Although gold is often viewed as a hedge against inflation, higher interest rates tend to reduce its appeal because it does not offer a yield.

Geopolitical tensions are also in focus after the Saudi-led coalition in Yemen said it intercepted and destroyed three ballistic missiles and drones launched by the Houthis toward two regions of Saudi Arabia. The latest development adds to broader regional uncertainty as the conflict intensifies.

Other precious metals are also under pressure, with spot silver down 1.6% at $53.06 an ounce, platinum off 1.3% at $1,506.94 and palladium lower by 1.8% at $1,030.75.

Our earlier coverage of the Fed’s internal debate over policy messaging explained how differing views among officials on public communication were influencing market expectations ahead of the next rate decision. We noted that frequent appearances by policymakers helped temper rate-hike bets after September’s increase, even as hotter inflation data kept the outlook uncertain and markets highly sensitive to any fresh signals.

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