Written by: Salma Al-Saqqa
Gold prices saw a slight increase at the beginning of the week, supported primarily by the decline in global oil prices, which helped calm fears related to inflation pressures in the markets. With increasing economic expectations, investors are closely watching upcoming US data to determine the path of future monetary policies.
Impact of the oil decline on gold trading
This drop in oil prices follows US President Donald Trump's decision to lift sanctions on Russia, which led to expectations of an increase in the volume of Russian fuel supplies in international markets, thereby exerting downward pressure on energy prices. This decline in energy costs is considered a positive factor for financial markets as it reduces the severity of inflation, which has positively reflected on the attractiveness of gold as a safe haven.
In terms of trading, the spot price of gold reached approximately $4,168 per ounce, while gold futures settled at the $4,189 level. Despite this rise, US import data for September still indicates that prices are rising at a faster pace than expected, driven by energy costs and other raw materials, confirming that inflation pressures remain a source of concern for economists.
Future of interest rates and monetary policy
Investors are currently focusing on the upcoming Personal Consumption Expenditures report and the Federal Open Market Committee meeting to anticipate trends in US interest rates. Since gold does not yield a return, its attractiveness is often affected by rising interest rates, as data from the CME Group's FedWatch tool indicates an 89 percent probability of an interest rate hike this coming December.
On another note, the International Monetary Fund indicated that the European Central Bank may move toward implementing an additional interest rate hike of 25 basis points during the current year, as part of its ongoing efforts to curb inflation in the Eurozone, which adds another layer of complexity to the global financial landscape and expectations related to currencies and precious metals.
