Solid Gold Berjangka – Gold prices weakened again during Wednesday’s trading (October 21), marking a decline for the fourth consecutive session. The latest price for XAU/USD hovered around US$4,119 per troy ounce, while U.S. gold futures for December delivery also remained under pressure.
Downward pressure on gold intensified as oil prices climbed, fueled by concerns over potential supply disruptions in the Middle East. Risks to shipping in the Red Sea and threats to energy infrastructure in Saudi Arabia have reignited market anxieties regarding inflationary pressures—a scenario that could prompt the U.S. to maintain a tight monetary policy.
Rising energy costs are a critical factor for gold; higher inflation strengthens the case for the Federal Reserve to keep interest rates elevated. This increases the opportunity cost of holding gold—an asset that yields no return—thereby dampening investor interest in the precious metal.
The market is now looking ahead to the Federal Reserve meeting scheduled for October 27–28. Expectations for an interest rate hike this month remain relatively low, at around 16%, while the probability of a hike in December stands at approximately 90%. Investors are also closely watching for any potential shifts in the Fed’s interest rate projections for the coming year.
Should expectations for Fed tightening begin to wane, gold could find room for a rebound. Conversely, if inflation remains high and expectations for rate hikes persist, the pressure on gold is likely to continue. Meanwhile, the U.S. Dollar Index has begun to stabilize following a period of weakness, further limiting demand for gold.
Looking ahead, investors will focus on next week’s U.S. Personal Consumption Expenditures (PCE) data—the Federal Reserve’s preferred gauge of inflation. At the same time, other precious metals remain under pressure, as market sentiment continues to be highly sensitive to the trajectory of U.S. interest rates and the movement of the dollar. (srh)