Gold prices experienced a modest increase during early Asian trading on Tuesday, following a significant rise of over 2% in the prior session. This uptick comes as a notable decline in oil prices has alleviated inflation worries, while market participants remain attentive to the results of the US midterm elections scheduled for later in the day. Spot gold increased by 0.3% to $3,960.80 per ounce as of 0032, continuing its upward trajectory following a rebound from a one-year low reached on Friday. US gold futures for December delivery stabilised at $3,970.80.
Oil prices declined by over 7% on Monday following Tehran’s announcement that discussions between Iran and the United States aimed at resolving their eight-month conflict were ongoing. This development came after several days of negotiations involving Iranian officials and Qatari mediators, which resulted in modified proposals but ultimately no significant progress. US manufacturing activity experienced an uptick in October, driven by robust domestic demand, which has sustained elevated inflation levels at the factory gate. Markets are currently concentrating on the US midterm elections for insights into the fiscal policy trajectory and overall investor sentiment.
Market participants currently assign a 73% probability to the Federal Reserve implementing a rate increase in December, as indicated by CME’s FedWatch tool. Elevated interest rates heighten the opportunity cost associated with holding non-yielding bullion, thereby diminishing its attractiveness to investors. The Bank of England is anticipated to increase rates on Thursday in response to inflationary pressures stemming from high energy costs, with forecasts suggesting a rise in the bank rate to 4.0% from 3.75%. Meanwhile, Japan has made gradual progress toward anchoring inflation around the central bank’s 2% target, according to the Bank of Japan on Monday, strengthening the argument for additional policy tightening.
The European Central Bank will need to implement another rate increase to avert the entrenchment of high inflation, and markets may be underestimating the measures required to mitigate price pressures, stated Slovak central bank chief Peter Kazimir. Spot silver increased by 0.3% to $50.79 per ounce, while platinum saw a rise of 0.2% to $1,451.48, and palladium also experienced a 0.2% uptick, reaching $970.50.
