Key Highlights

  • Spot gold traded near $4,089 on Thursday, down 1.3%, erasing the previous session’s gains.
  • Oil rose after attacks on Saudi targets and a US evacuation order, stoking Inflation fears.
  • The Fed is expected to hold on Oct. 27-28, but traders price about a 90% chance of a December hike, per CME FedWatch.
  • ANZ still sees gold moving above $5,000 an ounce in 2027.

Gold fell below $4,100 an ounce on Thursday, erasing the previous session’s gains, as another jump in oil prices raised the odds that central banks will keep raising interest rates. Silver fell more than 3.5% in the same session.

Spot gold traded at $4,088.95 an ounce, down $52.15, or 1.26%, at 0800 GMT, according to market reports. That is more than 8% below the roughly $4,474 level of late August, when gold dropped sharply after Federal Reserve Chair Kevin Warsh’s Jackson Hole remarks on curbing inflation.

Oil Is Driving the Narrative

Crude rose after a drone attack near Saudi Aramco’s Shaybah oilfield killed two people and the U.S. ordered some personnel and family members to leave its missions in Saudi Arabia. Brent climbed toward $112 a barrel. Reports also said the U.S. and Israel have drawn up plans for renewed strikes on Iran after the Nov. 3 midterms.

Gold is normally a refuge in a crisis. This time the geopolitical bid is being outweighed by an inflation effect: higher energy prices keep consumer prices elevated, which keeps interest rates high. Gold pays no interest, so higher rates raise the cost of holding it.

The Fed Question

The Fed raised interest rates in September for the first time since 2023, citing inflation pressure. It is widely expected to hold at its Oct. 27-28 meeting. Warsh declined to signal an October increase during remarks at the International Monetary Fund meetings in Bangkok last week, and traders cut the odds of an October hike to roughly 15% to 16%, according to CME’s FedWatch tool.

Markets still price about a 90% chance of a December increase, according to the same gauge, and economists polled by Reuters broadly expect the Fed to hold in October and tighten later. A December move is largely already reflected in futures positioning, which makes gold sensitive to any signal on Oct. 28 that tightening could continue into next year.

The Dollar and Yields

A firmer U.S. dollar and elevated Treasury yields added to the pressure. The 10-year Treasury Yield has been hovering near 5.1%, a multi-decade high, and a stronger dollar makes bullion more expensive for buyers using other currencies. Recent U.S. data show the economy is slowing: pending home sales fell to a record low in September, and housing starts declined. That has not been enough to ease rate expectations, because energy-driven inflation remains the Fed’s focus.

A Counterpoint From the Banks

Not everyone is bearish on the longer-term path. ANZ expects gold’s upside to remain capped in the short term before prices move above $5,000 an ounce in 2027, an outlook that depends partly on continued Investment and central-bank demand. Gold-linked equities and funds, including Newmont Corp. (NYSE: NEM) and SPDR Gold Shares (NYSE Arca: GLD), track those swings, though neither is the subject of any price call here.

What to Watch

Investors will focus on the Fed’s decision and Warsh’s press conference, oil prices and any widening of the Gulf conflict, and the direction of the dollar and Treasury yields. A technical break below recent lows would extend the slide, according to chart analysts. A de-escalation that pulls oil lower could ease the pressure on the metal.

Disclaimer: This content is for informational purposes only and does not constitute financial advice or a recommendation to buy, sell, or hold any security, currency or commodity. Prices, probabilities and estimates are from third-party sources, change quickly and may differ by provider. Investors should conduct their own research and consult a licensed financial adviser before making investment decisions.