Gold prices held steady near $4,000 an ounce, as traders braced for the Federal Reserve's decision this week, which is expected to leave interest rates unchanged.
The precious metal was little changed after rising 0.5% in the previous session. Oil prices fell for the second consecutive day as renewed diplomatic efforts boosted hopes of averting a war between the United States and Iran, while stocks were trending higher amid renewed enthusiasm for artificial intelligence following last week's sell-off.
However, gold remains under pressure. In addition to inflationary concerns stemming from persistently high energy prices, the precious metal has also been affected by a broader sell-off in artificial intelligence investments, as investors sold gold to cover losses elsewhere when technology stocks declined. On Friday, gold fell to its lowest level since mid-July.
Suki Cooper, global head of commodities research at Standard Chartered, wrote in a note: “Gold will need to establish a support level, as high oil prices keep inflation risks in focus, while the prospect of continued monetary tightening weighs on the metal.” She added that prices are at a critical juncture, noting that support levels will quickly evaporate if the metal fails to find technical support at $3,886 per ounce.
US interest rate expectations increase uncertainty
Expectations regarding the Federal Reserve's interest rate path changed over the past month, increasing uncertainty surrounding gold's near-term outlook.
Traders initially increased their bets on an interest rate hike in October after inflation data showed higher-than-expected readings, before comments from central bank officials curbed those bets.
The market is currently pricing in a roughly 10% probability of the US Federal Reserve raising interest rates this week, although continued high energy prices are still prompting traders to bet on a rate hike before the end of the year. High borrowing costs are putting downward pressure on gold, which does not pay interest.
Spot gold fell 0.2% to $4,007.66 an ounce at 7:47 a.m. Singapore time, and silver slipped 0.1% to $53.90 an ounce.
Platinum and palladium saw little change, while the Bloomberg Dollar Spot Index, which measures the performance of the US currency, rose slightly.
