Gold experienced a decline in early Asian trading on Tuesday as market participants looked ahead to the upcoming US Federal Reserve policy decision next week, seeking insights on interest rates and the overall trajectory of monetary policy. Spot gold declined by 0.3% to $4,126.84 per ounce as of 0102, while US gold futures for December delivery also decreased by 0.3% to $4,146.00. Investor attention has turned to the Federal Reserve’s policy meeting scheduled for October 27-28, alongside the upcoming release of the US Personal Consumption Expenditures data. This metric is a crucial indicator monitored by the central bank in its pursuit of a 2% inflation target.
The US central bank in September raised its benchmark overnight interest rates by 25 basis points to the 3.75%-4.00% range. According to CME’s FedWatch Tool, traders are pricing in an 83% probability that the central bank will maintain rates at their current levels next week, while the likelihood of an increase in December stands at 94%. Bank of Japan Governor Kazuo Ueda stated that underlying inflation is “quite close” to the central bank’s 2% target, with robust global AI demand contributing to inflationary pressures stemming from a tight job market, indicating potential for additional rate hikes.
Higher interest rates generally exert downward pressure on gold prices, as they elevate the opportunity cost associated with holding bullion, which yields no interest. On the geopolitical front, Yemen’s Iran-aligned Houthis announced on Monday that they executed multiple attacks targeting Saudi energy, airport, and military installations.
Among other metals, spot silver declined by 0.7% to $56.69 per ounce, platinum remained stable at $1,639.65, and palladium fell by 0.7% to $1,112.08.
