Gold prices experienced a modest increase during early Asian trading on Monday, as investors assessed the potential for a Federal Reserve rate hike later this year and anticipated new insights regarding the US central bank’s policy direction. Spot gold was up 0.2% at $4,174.54 per ounce by 0031, while U.S. gold futures for December delivery rose 0.4% to $4,195.70. Fed Chairman Kevin Warsh expressed optimism regarding the robustness of the US economy and noted his surprise at the resilience of global economies, which have managed to “hang in there” despite facing energy shocks and the implementation of tighter monetary policies designed to combat inflation.
US import prices rose more than anticipated in September, driven by increased costs for energy products and various other goods, providing further evidence of escalating inflationary pressures amid the ongoing conflict in the Middle East. Traders are currently assigning a 16% probability to a rate hike this month, while the likelihood of an increase in December stands at 92%, as indicated by CME’s FedWatch Tool. Gold is often viewed as a safeguard against inflation; however, elevated interest rates diminish the attractiveness of this non-yielding asset.
The European Central Bank is expected to increase interest rates by 25 basis points at least once more this year in response to inflationary pressures, according to the International Monetary Fund’s latest forecast report for Europe released on Friday. On the geopolitical front, Egypt is prepared to extend any necessary support to Saudi Arabia to ensure its security and stability, as stated by the presidency on Sunday. This comes in light of attacks by Yemen’s Iran-aligned Houthis on the kingdom, which heighten the risk of a wider conflict in the Middle East. Among other metals, spot silver rose 0.5% to $57.27 per ounce, platinum gained 0.4% to $1,637.24, and palladium climbed roughly 1% to $1,122.32.
