Gold Falls 3.5% for the Week as Brent Jumps to $116.72 a Barrel
Key Facts
Spot gold fell 3.5% in the week through the morning of Oct. 23, heading for its biggest weekly loss since June, according to Reuters. The decline came as energy prices rose, fueling inflation concerns and expectations that U.S. interest rates would remain higher for longer. In the same session, Brent crude rose 3.1% to $116.72 a barrel at settlement, its highest level since June 2022, according to the Associated Press. Crude was below $97 a barrel at the start of October. The simultaneous drop in gold and surge in oil refocused investors on the impact of energy costs on the inflation outlook and monetary policy.
Gold fell during the Oct. 23 session to its lowest level since July 20, before rebounding in a later update that morning. Reuters said spot prices rose 0.2% to $4,030.67 an ounce at 9:18 a.m. Eastern time, after dropping below $4,000 for the first time since mid-July. The session low was $3,986.50 an ounce. EL7 data showed gold closed at $3,995.81 an ounce on Oct. 23, compared with a close of $4,160.1 on Oct. 19. The weekly decline placed the metal’s move within a selloff that stretched across several sessions, while energy prices and yields remained among the main factors influencing its price.
On the energy front, Brent rose on Oct. 23 after trading below $97 at the start of the month, according to the Associated Press. The agency said the settlement price was $116.72 a barrel after a daily gain of 3.1%, the highest level since June 2022. The jump coincided with increases in U.S. energy and fuel price indexes in September. The energy index rose 5.2% for the month, while the gasoline index gained 9.1%, according to the U.S. Bureau of Labor Statistics. The increase in gasoline accounted for more than half of the monthly rise in the all-items consumer price index, keeping fuel costs at the center of the inflation debate.
Bureau of Labor Statistics data showed the U.S. consumer price index rose 0.6% in September, after a 0.4% increase in August, and was up 3.7% year over year in the 12 months through September. In another inflation measure, the personal consumption expenditures price index rose 0.3% monthly and 3.4% annually in August, according to the Bureau of Economic Analysis. The index excluding food and energy rose 0.2% monthly and 3.0% annually. Real consumer spending also rose 0.6% in August. These readings provide a backdrop to market concerns that rising energy prices could prolong price pressures, at a time when inflation remained above the Fed’s 2% target.
The Federal Reserve raised its target range for interest rates by a quarter percentage point to 3.75%-4.00% on Sept. 16. The central bank said in its statement that inflation “remains elevated” and reaffirmed its long-term 2% goal. As oil rose, markets reassessed the likelihood that rates would stay high, weighing on gold, which pays no yield. In the bond market, the 10-year U.S. Treasury yield rose to 4.99% on Oct. 23, from 4.96% late in Thursday’s session, according to the Associated Press. U.S. stock indexes also fell in the session, with the S&P 500 losing about 0.5%, the Dow Jones 1.2% and the Nasdaq 0.2%; the S&P 500 posted its second consecutive weekly loss.
Attention is turning to the Federal Open Market Committee meeting on Oct. 27 and 28. Its statement is due on Oct. 28 at 2:00 p.m. Eastern time, followed by a news conference at 2:30 p.m. Wall Street expects the Fed to hold rates at the meeting, with markets leaning toward another increase in December, the Associated Press said. Personal income and spending data for September were scheduled for release the following day at 8:30 a.m. Eastern time. The Associated Press expected the personal consumption expenditures index to show annual inflation of 3.7% in September, compared with the Fed’s 2% target. The preliminary third-quarter gross domestic product report was also expected the following week, with economists forecasting growth of 1.7% after 2.2% in the second quarter.