NEW YORK — Gold prices fell on Thursday as rising oil prices intensified inflation concerns and strengthened expectations that interest rates could remain elevated for an extended period. Higher borrowing costs weighed on the appeal of gold, which does not provide interest income.
Spot gold dropped 1.1% to $4,095.75 per ounce by 0721 GMT, after touching its lowest level since October 7 earlier in the session. US gold futures for December delivery also declined, falling 0.9% to $4,112.10.
The downturn in precious metals coincided with a rise in oil prices following renewed attacks by Yemen’s Houthi movement on Saudi Arabia. In response to the escalation, the United States ordered some diplomats and their family members to leave US missions in the kingdom, adding to concerns about regional security and possible disruptions to energy supplies.
Rising energy costs can increase expenses across transportation, manufacturing and other business sectors. If those increases spread through the broader economy and push inflation higher, central banks could have less flexibility to cut interest rates and may need to maintain restrictive monetary policies for longer.
Kelvin Wong, a senior market analyst at OANDA, said higher oil prices could fuel inflation expectations and increase the likelihood of higher interest rates over time, creating additional headwinds for gold.
Markets were not anticipating an immediate interest rate increase from the US Federal Reserve at its October 27-28 meeting. Data from CME’s FedWatch Tool showed traders assigning a 15% probability to a rate hike at that meeting, compared with an 87% likelihood of an increase in December.
Investors are also looking ahead to US Personal Consumption Expenditures data due on October 29. The PCE measure is closely watched by the Federal Reserve and could offer further insight into inflation trends and the future direction of monetary policy.
Gold typically faces pressure when interest rates and bond yields rise, as interest-bearing assets become more attractive to investors. Wong said expectations that yields would remain elevated at both the short and long ends of the US Treasury curve were raising the opportunity cost of holding gold.
Technical indicators also highlighted key price thresholds for traders. Reuters technical analyst Wang Tao identified $4,073 per ounce as a potential downside target for spot gold. Resistance stood at $4,135, and a move above that level could open the way toward the $4,150-$4,169 range.
Other precious metals also moved lower. Spot silver fell 3.3% to $56.06 per ounce, while platinum declined 2.1% to $1,594.96. Palladium lost 2.4%, reaching $1,061.00.
Rising energy prices, geopolitical uncertainty and changing expectations for interest rates remain key factors shaping the near-term outlook for precious metals.
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