Gold prices slid more than 1% in Asian trading on Thursday, breaching the $4,100 per ounce level as renewed geopolitical tensions in the Middle East bolstered expectations that the Federal Reserve will keep interest rates elevated for longer.
Spot bullion declined 1.1% to $4,094.90 by 0333 GMT, marking its weakest level since October 14. December gold futures also fell 0.9% to $4,111.40. The precious metals complex saw broad weakness, with silver tumbling 2.6% to $56.44 an ounce, platinum losing 2.1% to $1,594.25, and palladium dropping 2.6% to $1,059.05.
Fed Rate Path Weighs on Bullion
Despite traders assigning only a 16% probability of a rate hike at next week's Federal Reserve meeting, the market is pricing in roughly a 90% likelihood of an increase in December. This leaves gold vulnerable to restrictive monetary policy even if the Fed pauses in October.
The pressure originates in the oil market, where fresh attacks linked to Yemen's Houthi movement have revived concerns about Saudi energy infrastructure and Gulf shipping. Expensive crude can feed into consumer prices, making it harder for the Fed to bring inflation back to its 2% target. That, in turn, supports expectations for higher bond yields, increasing the opportunity cost of holding non-yielding gold.
OANDA senior market analyst Kelvin Wong noted that a sustained oil rally could strengthen expectations of prolonged monetary tightening, with elevated yields at both ends of the Treasury curve limiting bullion's appeal.
Silver's Slide Contrasts with ETF Demand
The sell-off was not confined to gold, but the longer-term investment picture shows resilience. World Gold Council data reveal that physically backed gold exchange-traded funds attracted $10 billion in September, taking quarterly inflows to a record $31 billion. Holdings increased by 67 tonnes to 4,256 tonnes even as gold lost 8.5% that month.
Antonio Di Giacomo of XS.com said higher returns on debt instruments were increasing the relative cost of holding bullion, but he still saw geopolitical uncertainty as a potential source of safe-haven demand.
Technical Levels and Outlook
With $4,100 breached, traders are watching the October 14 low around $4,073. A sustained break would bring $4,000 into focus, while a recovery above $4,135 could open the way towards $4,150–$4,169.
Kotak Neo commodity researcher Kaynat Chainwala, in an October 21 analysis published by Business Standard, said persistent oil strength could push inflation expectations, Treasury yields, and the dollar higher, potentially sending gold towards $4,000. Conversely, sustained relief in crude and yields could allow a recovery towards $4,300–$4,400.
Neither outcome is assured. The next move depends on whether energy prices keep reinforcing Fed tightening expectations or allow bond yields to ease.
This article is for informational purposes only and does not constitute financial advice.
