Oil prices add to pressure on gold before the Fed meets
Higher energy costs have raised expectations of prolonged high interest rates, putting people who hold gold and traders in silver under pressure.
Gold eased on Friday, CNBC reported.
The selloff is an interest-rate story before it is a jewellery story. CNBC reported Friday that investors were waiting for next week's Federal Reserve policy meeting, while CME's FedWatch Tool showed a 92% chance that the Fed would leave rates unchanged and a 78% probability of a December hike.
Investify reported Friday that the metal had lost 3.5% this week, putting it on course for its sharpest weekly drop since June, while December US gold futures fell 0.7% to $4,030.40. That puts the futures market close enough to a round-number test to make positioning matter.
How much of this is reported, and how much is our inference
- Gold eased on Friday, headed for its steepest weekly decline in over four months as elevated oil prices bolstered higher-for-longer interest rate expectations, while investors awaited next week's Federal Reserve policy meet.cnbc.com
- They see a 92% chance of the Fed leaving rates unchanged next week and a 78% probability of a December hike, according to CME's FedWatch Tool.cnbc.com
- Elsewhere, gold buying picked up in India this week as lower prices during the major Dussehra festival boosted purchases and lifted premiums, while physical demand in top consumer China was steady even as cautious consumers continued to curb jewellery spending.cnbc.com
- The metal has lost 3.5% this week, putting it on course for its sharpest weekly drop since June, while December US gold futures fell 0.7% to $4,030.40.investify.pk
- Higher oil prices have strengthened expectations that the Federal Reserve will keep rates elevated for longer, raising the cost of holding bullion, which does not pay interest.investify.pk
- Investors are watching the Fed’s October 27-28 meeting and next week’s PCE inflation data; markets largely expect no rate change, while the probability of a December hike stands at 80%.investify.pk
- Oct 22 (Reuters) - Gold fell to its lowest level in more than two months on Thursday as higher oil prices fueled inflation concerns, reinforcing expectations that interest rates could remain elevated for longer, while investors looked ahead to next week's Federal Reserve meeting.marketscreener.com
- Oil prices climbed about 3% to a five-month high after Houthi attacks in Saudi Arabia stoked concerns of further disruption to energy supplies from the key exporting region.marketscreener.com
- Additionally, last week's US consumer and producer inflation data came in hotter than expected, strengthening the case for tighter policy, even though Fed officials are still expected to hold off when they meet on October 27-28.marketscreener.com
- Speculators are trying to defend the key US$4,000 level for gold because a clean break below would signal that the market has stopped pricing rate relief and started pricing sticky inflation, elevated yields, and a stronger dollar, said Monte Safieddine, the head of market research at Capital.com.theedgemalaysia.com
- Oil prices rose on Friday after Houthi attacks in Saudi Arabia stoked concerns of further disruption to energy supplies from the Middle East.theedgemalaysia.com
- Elevated energy prices bolster expectations of higher-for-longer interest rates by the Fed, increasing the opportunity cost of holding non-yielding bullion.theedgemalaysia.com
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent on a seasonally adjusted basis in September after rising 0.4 percent in August, the U.S.U.S. Bureau of Labor Statistics
- Silver futures fell for a second straight session Thursday, closing at their lowest level in almost a year as rising oil prices keep alive concerns about inflation and prospects for higher interest rates.marketscreener.com
- "The market is finding a balance between demand for gold accumulation and pressure from high interest rates," XS.com market analyst Linh Tran said in a note.marketscreener.com
- The selloff is an interest-rate story because reports tie the move to oil-driven inflation concern and higher expected rates, while physical demand in India and China did not collapse.
- Physical buying is the counterweight to the rates story, but it has not displaced the pressure from high interest rates in the public reports.
- If the Fed signal stays higher for longer, bullion and silver face pressure because non-yielding metal competes with interest-bearing cash and debt.
- The open test is whether the Fed meeting, PCE inflation data and CME's FedWatch Tool move the December-hike probability higher or lower from the latest cited readings.
Show the data
| Class | Count | Claims |
|---|---|---|
| Reported | 15 | C1–C15 |
| Inferred | 2 | C16, C17 |
| Financial implication | 1 | C18 |
| Testable | 1 | C19 |
Reuters reported Thursday that gold fell to its lowest level in more than two months as higher oil prices fueled inflation concerns and reinforced expectations that interest rates could stay elevated for longer. The same report said investors were looking ahead to next week's Federal Reserve meeting, so the metal's fall is now tied to the central bank's signal rather than only to spot demand.
Reuters also reported Thursday that oil prices climbed about 3% to a five-month high after Houthi attacks in Saudi Arabia raised concern about energy supplies from the key exporting region. Oil is the transmission belt in this trade: higher fuel costs feed inflation anxiety, and inflation anxiety supports the case for tighter money.
The U.S. Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers increased 0.6 percent on a seasonally adjusted basis in September after rising 0.4 percent in August.
The selloff is an interest-rate story
Investify reported Friday that higher oil prices had strengthened expectations that the Federal Reserve would keep rates elevated for longer, raising the cost of holding bullion, which pays no interest. theedgemalaysia.com made the same mechanism explicit, saying elevated energy prices raise the opportunity cost of owning non-yielding bullion.
theedgemalaysia.com quoted Monte Safieddine, the head of market research at Capital.com, saying speculators were trying to defend the key US$4,000 level for gold because a clean break below would signal that the market had stopped pricing rate relief and had started pricing sticky inflation, elevated yields and a stronger dollar. That quote turns a chart line into a rate call.
Marketscreener reported Thursday that silver futures fell for a second straight session and closed at their lowest level in almost a year as rising oil prices kept alive concern about inflation and prospects for higher interest rates. The spillover matters because gold is not the only metal being repriced through the same rates channel.
Physical buying is the counterweight
CNBC reported Friday that gold buying picked up in India during the major Dussehra festival as lower prices boosted purchases and lifted premiums. Physical demand in China was steady even as cautious consumers curbed jewellery spending.
XS.com market analyst Linh Tran said in a note that the market was finding a balance between demand for gold accumulation and pressure from high interest rates. That is the best case against reading the fall as a one-way rates trade: lower prices can draw buyers even when yields make bullion costly to own.
That counterweight does not yet overturn the main signal. India and China help explain why the fall has not become a pure exit from the metal, but the public reports still tie the marginal price pressure to oil, inflation concern and the Federal Reserve. The stronger reading is a contest between physical buying and the income available elsewhere.
The next test is public
Investify reported Friday that investors are watching the Fed’s October 27-28 meeting and next week's PCE inflation data, with markets largely expecting no rate change while the probability of a December hike stood at 80%. A separate CNBC report gave a slightly lower December-hike probability, so the exact print is less important than the direction after fresh inflation data.
For someone holding gold, the pressure is straightforward: if interest-bearing assets keep looking more rewarding, bullion has to compete harder for a place in a portfolio. Traders in gold and silver futures face the same pressure if expectations of prolonged high interest rates persist.
Gold can still catch a bid when buyers step in, and CNBC's report shows that buyers did step in. The question for the next move is whether the Fed signal rewards patience in bullion, or makes patience look like a cost.