Gold rises 0.5% to $4,014.49 as Brent retreats and markets await Fed
Key Facts
Spot gold rose 0.5% to $4,014.49 an ounce by 0924 GMT on Monday, October 26, after reaching $3,975 on Friday, its lowest level since July 20. The recovery came as oil prices fell after their rise stoked fears of mounting inflationary pressure. Brent futures were down 2% to about $114 a barrel at the same time, after climbing to a six-month high the previous week. UBS analyst Giovanni Staunovo said some investors "see the $4,000 level as a buying opportunity." The metal regained that psychological level but remained close to it ahead of the Federal Reserve meeting.
The rebound did not erase the previous week's losses: gold ended the week through October 23 down 4%, its steepest weekly decline since June. Its slide coincided with a rise in oil, which brought inflation fears back to the forefront of market pricing. Capital.com analyst Kyle Rodda said the recent rise "mostly reflects the relief provided by the decline in oil prices." He added that market positioning ahead of the Fed decision could limit gains. That leaves the metal's moves tied to two overlapping forces: energy's effect on inflation expectations and expectations for U.S. monetary policy.
Oil had rallied sharply in previous sessions before retreating on Monday. Brent rose 3.1% to settle at $116.72 a barrel on Friday, October 23, after trading below $97 at the start of the month, reaching its highest level since June 2022, according to the Associated Press. A Reuters report pointed to hopes of easing tensions between the United States and Iran, while supply concerns remained. The decline in crude eases some concern about energy costs feeding through to inflation, but does not eliminate market sensitivity to any developments affecting oil flows. That is why lower crude prices helped gold at the start of the week, Rodda said.
Markets are awaiting the Federal Open Market Committee meeting on October 27 and 28, after the CME FedWatch tool showed a 9% probability of a rate hike on Wednesday and an 80% probability of a hike in December, according to a Reuters morning report. The Fed raised its target rate range by a quarter of a percentage point to 3.75%-4% on September 16 and said inflation remained elevated. Rate expectations affect the appeal of gold, which yields no income, while bets on tighter policy can also offset the impact of lower oil prices. The Fed chair is scheduled to hold a news conference on October 28. Minutes from the October meeting will then be released on November 18, with the next meeting scheduled for December 8 and 9.
The World Gold Council's September report shows that the metal's moves depend on more than oil and interest rates. The 10-year U.S. Treasury yield rose 53 basis points to 5.3% during the month, and the dollar index climbed 2%—two factors the council attributed as major contributors to gold's decline at the time. That context places Monday's rebound in a market still facing pressure from yields and the dollar, alongside the influence of inflation expectations. In the mining sector, Newmont estimated that a $10-a-barrel change in Brent is associated with a direct cost impact of $60 million and an indirect impact of $50 million. That means crude price movements enter producers' cost calculations through multiple channels, while lower oil may affect those costs in line with each company's stated sensitivity.
After the Fed meeting, attention will turn to the U.S. personal income and spending report, scheduled for October 29 at 8:30 a.m. local time. It includes the September personal consumption expenditures price index reading, according to the Bureau of Economic Analysis calendar. The release comes one day after the committee's expected decision, making inflation data one of the week's next milestones after the meeting. Investors are also awaiting the Fed chair's news conference on October 28 to understand the decision, followed by the minutes scheduled for November 18. The committee's next meeting is set for December 8 and 9. December rate bets will remain part of gold pricing after the CME FedWatch tool put the probability of a hike at that meeting at 80%, as reported by Reuters.