Gold Heads for Steep Weekly Loss as Oil Prices Fuel Federal Reserve Rate Concerns

Gold eased on Friday, headed for its steepest weekly decline in over four months as elevated oil prices bolstered higher-for-longer interest rate expectations. Investors are currently awaiting next week's Federal Reserve policy meet.

Spot gold eased 0.2 per cent to $4,016.27 per ounce by 0351 GMT, paring losses slightly after touching its lowest level since July 20 earlier in the session. The metal has fallen 3.5 per cent so far this week, which is poised to be its worst performance since June.

US gold futures for December delivery dropped 0.7 per cent to $4,030.40.

According to Monte Safieddine, head of market research at Capital.com, speculators are trying to defend the key $4,000 level for gold. A clean break below this threshold would signal that the market has stopped pricing rate relief and started pricing sticky inflation, elevated yields, and a stronger dollar.

Oil prices rose about 4 per cent to a five-month high on Thursday after Houthi attacks on Saudi Arabia stoked concerns of further disruption to energy supplies. Elevated energy prices bolster expectations of higher-for-longer interest rates by the Fed, increasing the opportunity cost of holding non-yielding bullion.

Safieddine added that any further escalation on the geopolitical front risks pushing oil even higher. Higher oil is reviving inflation fears, lifting yields, and delaying Fed easing, creating a difficult cocktail for bullion.

Market focus has turned to the Fed's October 27-28 policy meeting and next week's Personal Consumption Expenditures (PCE) data. This data is a closely watched gauge as it serves as the central bank's preferred inflation measure while it targets a 2 per cent inflation rate.

Traders are largely expecting the central bank to leave interest rates unchanged next week. However, expectations for an interest rate hike in December remain at 80 per cent.

Meanwhile, analysts at HSBC cut their average 2026 platinum and palladium price forecasts in a research note on Thursday, citing shifting market fundamentals and investor liquidation.

Among other metals, spot silver slid 1 per cent to $53.98 per ounce, platinum fell 0.1 per cent to $1,568.58, and palladium steadied at $1,054.50. All three metals were headed for weekly declines.

"The recent drop in gold prices and the pressure on precious metals highlight how tightly global commodities are linked to macroeconomic indicators like energy prices and interest rate expectations. For entrepreneurs and business leaders, rising oil prices and sticky inflation mean that managing capital costs and factoring in potential delays in monetary easing are critical. Monitoring these macroeconomic shifts helps businesses prepare for tighter liquidity and changing market dynamics in the months ahead." — Dr. Shishir Gupta, Founder & CEO, StartupLanes