Gold prices held steady around US$4,150 per troy ounce during Monday’s trading, as investors monitored a decline in oil prices while awaiting next week’s Federal Reserve meeting. The softening in oil prices helped alleviate concerns regarding energy-driven inflationary pressure; however, expectations surrounding U.S. interest rates continued to limit the upside for gold.
Oil prices retreated from a five-month high following the imposition of sanctions and tariffs on Russia by U.S. President Donald Trump. These measures have fueled hopes for an increase in global energy supplies, potentially easing pressure on fuel costs and inflation.
Nevertheless, recent U.S. CPI and PPI data indicate that inflation remains higher than anticipated—partly driven by rising gasoline prices—leaving the market cautious about the possibility that the Federal Reserve may maintain its current monetary policy for longer.
The market is now looking toward the Federal Reserve’s interest rate decision and the upcoming U.S. PCE inflation data, a key metric monitored by the central bank. Market participants estimate a relatively low probability—around 15%—of an interest rate hike at this month’s meeting, while the probability of a hike by December remains at approximately 89%.
The global interest rate outlook also exerts pressure on gold, with the European Central Bank expected to have room for at least another 25-basis-point rate hike this year. Although gold is frequently used as an inflation hedge, rising interest rates enhance the appeal of yield-bearing assets, creating a headwind for precious metals, which do not provide a return.