Spot gold rises 0.8% to $3,903.90 as oil falls and election looms

Key Facts

Spot gold rose 0.8% to $3,903.90 an ounce by 0757 GMT on 2 November, while U.S. futures for December delivery climbed 0.4% to $3,913.20, according to a Reuters report. The move followed a sharp drop in the previous session, as falling oil prices eased some inflation-related pressure. Investors also tracked talks between Iranian and Qatari officials and what they could mean for supply disruption and tensions in the Middle East. Market analyst Kyle Rodda said gold was "seeing a rebound after the sell-off, alongside lower oil prices at the start of the week, providing some relief for precious metals generally." The move remained a recovery from earlier losses, while the market also turned its attention to the U.S. midterm elections scheduled for 3 November.

Losses at the end of October had pushed gold to a one-year low. On 30 October, spot gold fell 3.63% to $3,874.58 an ounce, amid a sell-off in technology stocks and concerns that higher energy prices could fuel inflation. During periods of pressure on stocks, investors may sell gold to raise cash and cover other losses or obligations, putting the metal under pressure despite its status as a safe-haven asset. EL7 data show gold closed at $3,898.9 on 30 October and $3,969.6 on 2 November. Those closing prices place the recovery within a rebound following the decline, while Reuters' intraday spot price reading differs from EL7's closing data.

Oil prices fell more than 7% on 2 November after three days of discussions between Iranian and Qatari officials, with a Reuters report linking the market move partly to hopes of de-escalation in the Middle East. Iran and Qatar had held talks for three consecutive days through 1 November, with a draft proposal in circulation and a follow-up meeting possible. Reuters reported that the proposals had changed without a breakthrough, so the talks did not amount to an announcement of an agreement or settlement. Richard Flax, chief investment officer at Moneyfarm, said the market move was linked partly to hopes of de-escalation. Lower oil prices also supported European travel and leisure shares, which rose 3% for their strongest daily gain since June, according to Reuters.

Oil matters to the gold market through inflation and interest-rate expectations. Higher energy prices typically reinforce expectations that U.S. interest rates will remain elevated for longer, increasing the opportunity cost of holding non-yielding gold. Conversely, falling oil prices ease some inflationary pressure but do not settle the course of monetary policy. On 28 October, the Federal Reserve held its target rate range at 3.75% to 4.00% in a 10-to-2 vote and said inflation "remains elevated." After the meeting, three officials at the bank defended further rate increases on Friday to combat elevated inflation, keeping bets on tighter monetary policy in investors' calculations.

Investors then turned their attention to the U.S. midterm elections on 3 November and the potential impact of the results on fiscal policy and market sentiment. The U.S. Bureau of Labor Statistics was scheduled to release its September Job Openings and Labor Turnover Survey on 3 November at 10 a.m. Eastern time. The October Consumer Price Index report is due next, on 10 November at 8:30 a.m. Eastern time. These dates come as traders weigh the impact of energy on inflation, labor-market indicators and the Fed's signals on interest rates. These developments are likely to keep oil and monetary policy on the list of factors watched by gold markets.