Gold closes at $4,033.4 as markets await Fed decision and inflation data

Key Facts

EL7 data showed the GCUSD gold contract closing at $4,033.4 on October 26, compared with $4,007.9 on October 23. Spot gold data showed XAUUSD closing at $4,019.08, after $3,995.81 on October 23. In a separate trading snapshot, spot gold rose 0.5% to $4,014.49 an ounce on Monday after touching $3,975 on Friday, its lowest level since July 20. Reuters also reported a morning snapshot at $4,007.57, up 0.3%, after the same Friday low. These prices show a recovery above $4,000 after Friday’s decline, as the market’s focus turns to this week’s Federal Reserve meeting.

The Federal Open Market Committee meeting begins on October 27 and runs through October 28, with the press conference scheduled for the second day, according to the Federal Reserve calendar. The World Gold Council said markets were pricing in less than a 10% chance of a rate hike at the October meeting, down from about 70% a month earlier. Further out, Reuters reported that expectations of a December rate hike had reached 82%, according to CME’s FedWatch tool. These estimates concern two different meetings: the council’s reading relates to October, while the FedWatch reading concerns December. The meeting follows the Federal Reserve’s rate hike in September, while a pause was widely expected for the October decision, Reuters reported.

The indicators shaping gold pricing are mixed, with falling bond yields and a weaker dollar on one side, and price pressures and strong economic activity on the other. The World Gold Council said U.S. Treasury yields fell sharply over the previous week and the dollar weakened, while oil rose to a six-month high. In September, gold ended the month at $4,176 an ounce, down 8.5% month on month, while global gold exchange-traded funds recorded inflows of $10 billion, or 67 tonnes. The council attributed gold’s decline at the time to rising yields and the dollar, and a retreat in futures positions. The inflows highlight that investors added to fund holdings during a month in which the metal’s price fell.

S&P Global’s flash survey showed U.S. growth remained strong in October despite the composite output index easing to 57.6 points from 58.4 in September. The survey data put the annualized equivalent growth rate at 5.0%. At the same time, the overall rise in prices for goods and services was the largest since August 2022, and manufacturers’ selling prices rose at their fastest pace since July 2022. Employment also increased at its fastest rate since June 2022, while manufacturing jobs growth was the fastest since March 2012. The survey results combine strong growth and accelerating employment with mounting price pressures, indicators investors are watching ahead of the rate decision.

In market moves ahead of the meeting, Reuters said falling oil prices eased some inflation concerns, alongside a rise in gold on Monday morning. Available sources did not confirm the figures in the previous draft for oil prices or their percentage changes, so those prices are not included in the description of the move. On regional factors, the Associated Press said talks in Iran addressed the Yemen war and Houthi attacks on Saudi Arabia. A strategist at StoneX expected trading to be light, with gold around $4,000 until the Fed announcement. He said: "I think trading will be light here, and we’ll stay around the $4,000 level until the Fed announcement."

Attention shifts after the meeting to U.S. data scheduled for October 29, with the Bureau of Economic Analysis setting the release of its advance estimate of third-quarter GDP and September personal income and spending data for 8:30 a.m. The World Gold Council forecast personal consumption expenditures inflation at 3.6% year on year. It also forecast third-quarter GDP growth rising to 3.2%, from 2.2% in the second quarter. The data are due the day after the Fed meeting and its press conference scheduled for October 28. The market is watching these figures alongside the committee’s signals, after gold recovered above $4,000 from Friday’s low.