Gold Falls 1.9% to $4,060.37 as Oil Rises and Rate Concerns Mount
Key Facts
Spot gold fell 1.9% to $4,060.37 an ounce by 11:34 GMT on October 22, its lowest level since August 4, according to Reuters. Prices had earlier dropped 1.4% to $4,081.89 by 09:02 GMT, while U.S. gold futures for December delivery fell 1.3% to $4,097.90. By 11:34, December futures had fallen 1.8% to $4,075.70. The readings show gold’s losses widening during the session, alongside rising oil prices and concerns that energy costs could feed into inflation. Kelvin Wong of Oanda said a continued rise in oil could lift inflation expectations and increase the likelihood that interest rates remain higher for longer, "putting pressure on gold."
Oil prices rose by more than $2 a barrel on Thursday after further Houthi attacks in Saudi Arabia raised concerns about an escalation and additional disruption to crude supplies, Reuters reported. In a later market reading, Brent futures rose 3.7% to $112.89 a barrel, their highest level in more than five months, according to data cited by Investing.com. The report linked Brent’s rise to new attacks on Saudi energy infrastructure and airports. The move highlights the link between supply concerns and crude prices in a session that put pressure on gold. ANZ analyst Soni Kumari said uncertainty in the energy market could push gold lower, adding: "We are still seeing a lot of uncertainty in the energy market."
At the Shaybah field in southeastern Saudi Arabia, the Energy Ministry said air defenses intercepted a drone on October 21 that attempted to target a facility at the field. The incident killed two people and injured two, according to the Saudi Press Agency. The people killed were Filipino and Nepali, while those injured were Pakistani and Indian. The incident sparked a fire in a contractor’s vehicle outside the facility, the ministry said. It confirmed that field operations were unaffected, placing the incident in the context of energy security concerns without indicating any production disruption at Shaybah.
U.S. consumer price data for September provide further context for inflation concerns. The headline index rose 0.6% during the month, after a 0.4% increase in August, and its annual rise accelerated to 3.7% from 3.4%, according to the U.S. Bureau of Labor Statistics. The gasoline index jumped 9.1%, accounting for more than half of the monthly increase in the headline index, while the energy index rose 5.2% after a 2.1% increase in August. The index excluding food and energy rose 0.3% in September, the same monthly increase as in August. Its annual increase, however, accelerated to 2.6% in the 12 months through September, from 2.4% in the period through August, keeping core inflation on markets’ radar as they track the rate outlook.
Traders priced in an 86% chance of a U.S. rate hike in December, according to CME Group’s FedWatch tool, as cited by Reuters. On September 16, the Federal Reserve raised its target rate range by a quarter percentage point to 3.75%-4%. The decision statement was approved by a 12-0 vote and described inflation as "still elevated." At the October 22 close, spot gold was $4,024.51 an ounce, while the gold contract settled at $4,060.4, according to EL7 data. On October 23, spot gold was $4,016.025, and silver closed at $53.746, according to the same data.
Markets are looking ahead to the Federal Open Market Committee meeting on October 27 and 28, the next scheduled policy decision. Reuters reported that officials were still expected to hold rates steady at the meeting, while December pricing showed a higher chance of a rate hike. U.S. personal consumption expenditures data are due on October 29, offering further signals on the price outlook. The Fed has said minutes of scheduled meetings are generally released three weeks after a policy decision. The sequence of the October meeting and upcoming data puts rate bets at the center of investors’ focus after a session in which gold fell as oil rose.