Gold prices fell more than 1.5% in the European market on Thursday, resuming losses that had paused briefly the previous day, dropping below the $4,100 per ounce mark and hitting their lowest level in two weeks, due to rising oil prices, which are fueling inflation fears and reinforcing expectations that global interest rates could remain high for a longer period.
The precious metal's losses are being limited by the US dollar falling to its lowest level in three weeks against a basket of currencies, as the market awaits more important economic data from the United States before the Federal Reserve meeting next week.
Price overview
Gold prices today: Gold prices fell by 1.8% to ($4,066.85), the lowest level since October 7, compared to the opening level of trading at ($4,141.07), and recorded a high level at ($4,141.98).
When prices settled on Wednesday, gold prices rose 0.4%, their first daily gain in four days, thanks to a decline in the US dollar and yields.
global oil prices
Oil prices rose more than 2% on Thursday, with Brent crude hitting a five-month high, due to further Houthi attacks in Saudi Arabia, which prompted the United States to order some diplomats and their families to leave its missions in the kingdom.
There is no doubt that rising oil prices are fueling inflation concerns and increasing pressure on monetary policymakers at global central banks to implement further monetary tightening or, at the very least, keep interest rates high for as long as possible.
US dollar
The dollar index fell more than 0.2% on Thursday, deepening its losses for the third consecutive session and hitting a three-week low, reflecting the continued decline in the US currency against a basket of major and minor currencies.
As we know, a falling US dollar makes gold bullion priced in US dollars more attractive to buyers holding other currencies.
The US dollar is currently declining in value as purchases of the currency as the best available investment slow down, especially with the waning of hawkish expectations regarding raising US interest rates in the coming period.
US interest rate
According to the CME Group's FedWatch tool, the probability of the Federal Reserve keeping interest rates unchanged at its October meeting is currently priced at 85%, and the probability of a 25-basis-point rate hike is priced at 15%.
The probability of the Federal Reserve keeping interest rates unchanged at its December meeting is currently priced at 14%, and the probability of a 25-basis-point rate hike is priced at 86%.
In order to reassess those probabilities, investors are closely monitoring the release of further economic data from the United States. Weekly jobless claims are due later today.
The Federal Reserve will meet next week to discuss monetary policy appropriate to developments in the world's largest economy, where more clues about the future path of US interest rates are likely to be revealed.
Gold performance forecast
Kelvin Wong, Asia Pacific market analyst at OANDA, said that continued high oil prices could lead to increased inflation expectations, which would boost the likelihood of higher long-term interest rates and put pressure on gold prices.
Wong explained that investors expect interest rates to remain high at both ends of the yield curve, in the short and long term, which reduces the appeal of gold by increasing the opportunity cost of holding a non-yielding asset.
SPDR Fund
Holdings of gold at SPDR Gold Trust, one of the world’s largest gold-backed exchange-traded funds, fell by about 2.57 metric tons on Wednesday, bringing the total down to 1,057.61 metric tons.
