Written by: Salma Al-Saqqa
Gold prices witnessed a noticeable rise at the beginning of the week's trading, supported by a decline in oil prices, at a time when investors are awaiting the release of upcoming inflation data and the results of the Federal Reserve (US Central Bank) meetings to determine the paths of monetary policy and interest rates during the coming period. These movements in global markets come amidst ongoing assessment of interest rate hike probabilities and the search for new indicators affecting the stability of the yellow metal.
Impact of the oil decline on the precious metal
Gold in spot transactions recorded an increase of 0.3% to reach $4175.60 per ounce, while US gold futures for December delivery rose by 0.4% to reach $4196.40. Tim Waterer, a market analyst at KCM Trade, believes that the precious metal is responding positively to the weak trend in oil prices. Waterer explained that the drop in oil reduces concerns related to inflation, which enhances the attractiveness of gold in the short term.
Oil prices fell globally following the decisions of US President Donald Trump to exempt Russia from some sanctions and tariffs, which could lead to an increase in Russian fuel export flows to markets. Investors are closely monitoring these developments, especially in light of the rise in US import prices last September, which was mainly driven by the rising costs of energy products and other consumer goods, indicating continued inflationary pressures.
Awaiting inflation data and interest rate decisions
Market participants' attention is turning towards the Federal Open Market Committee meetings, in addition to the release of the upcoming personal consumption expenditures data next week, which are metrics relied upon by the US Central Bank to measure its inflation targets of 2%. Expectations indicate varying probabilities for interest rate hikes, with traders placing a 16% probability for a hike this month, while the probability rises to 92% for next December.
Despite gold's historical role as a hedge against inflation, raising interest rates remains a pressure factor that reduces the attractiveness of the metal, which yields no return. In a related context, the International Monetary Fund indicated the possibility that the European Central Bank would raise interest rates by at least 25 basis points this year. As for other precious metals, silver recorded a 0.9% increase to reach $57.54 per ounce, platinum rose 0.7% to $1642.29, while palladium rose 1.5% to reach $1129.13.
