Gold Prices Fall Over One Percent Amid Rising Oil Prices and Federal Reserve Rate Outlook

Gold prices fell by more than 1 percent on Thursday, reaching their lowest point since October 14. The drop was primarily driven by rising oil prices, which stoked inflation concerns and reinforced expectations that interest rates could stay higher for longer periods.

Spot gold slid 1.3 percent to $4,085.29 per ounce by 0530 GMT. Meanwhile, US gold futures for December delivery dropped 1.2 percent to $4,100.90. Among other precious metals, spot silver fell 3.3 percent to $56.05, platinum declined 2.2 percent to $1,593.05, and palladium dropped 2.7 percent to $1,057.32.

The movement in energy markets followed rising oil prices on Thursday, prompted by further attacks by the Houthis in Saudi Arabia. This situation led the United States to order some diplomats and family members to leave its missions in the Kingdom.

According to Kelvin Wong, a senior market analyst at OANDA, continued increases in oil prices could drive up inflation expectations. This scenario raises the likelihood of higher interest rates over the longer term, thereby weighing on non-yielding assets like gold by increasing their opportunity cost.

While stubborn inflation driven by energy prices has bolstered the case for tighter monetary policy, Federal Reserve policymakers are expected to remain patient in the near term. Traders currently see a 15 percent chance of a rate hike at the Fed's upcoming policy meeting on October 27-28. However, market participants are pricing in a 91 percent likelihood of an increase in December, based on CME's FedWatch Tool.

Investors are also awaiting next week's Personal Consumption Expenditures (PCE) data, which serves as a key inflation gauge for the central bank as it targets a 2 percent inflation rate.

From a technical standpoint, Reuters technical analyst Wang Tao noted that spot gold continues to target the October 14 low of $4,073 per ounce, as suggested by a wedge pattern. Immediate resistance is observed at $4,135, and a break above this level could push prices into the $4,150 to $4,169 range.

"The recent drop in gold prices highlights how closely macroeconomic indicators are linked across global markets. When geopolitical tensions drive up energy costs, it immediately shifts inflation expectations and monetary policy outlooks. For businesses, founders, and investors, this environment means preparing for elevated borrowing costs and factoring tighter financial conditions into long-term capital planning. Understanding these commodity and currency shifts is essential for navigating broader economic volatility." — Dr. Shishir Gupta, Founder & CEO, StartupLanes