Gold Extends Decline Near $4,115 an Ounce on Uncertainty Over US-Iran Peace Talks, Fed Outlook
Summary
- International gold prices were reported to be extending losses near $4,115 an ounce amid uncertainty over US-Iran peace talks and caution over the Fed’s rate outlook.
- Gold prices have fallen about 20% since the armed conflict between the US and Iran began, with surging energy prices and the prospect of higher rates for longer weighing on gold’s investment appeal.
- Markets are assigning high odds to an additional rate hike at next week’s Fed monetary policy meeting, while prices for precious metals including gold, silver, platinum and palladium are also moving lower.
Forecast Trend Report by Period
International gold prices extended their decline amid uncertainty over US-Iran peace talks and caution over the Federal Reserve’s interest-rate outlook.
Bloomberg reported on October 21 that spot gold was trading around $4,115 an ounce. As of 8:08 a.m. in Singapore, spot gold was down 0.2% from the previous session at $4,117.83 an ounce. Losses for the week have exceeded 1%.
The main factors driving gold are the war in the Middle East and movements in crude oil. Oil pulled back from a five-month high the previous day after reports said a US-Iran peace agreement was near, but uncertainty persisted after a diplomat involved in the negotiations denied the report.
Gold has fallen about 20% since armed conflict between the US and Iran began in late February. The war’s impact sent energy prices sharply higher and stoked inflation concerns, increasing the possibility that high interest rates will remain in place for longer and weighing on gold. Because gold is a non-yielding asset, it tends to become less attractive when rates rise.
Recent US economic data, however, have shown signs of slowing, and Treasury markets have also reflected moves toward lower rates. US housing starts for September fell to the lowest level in four months, while pending home sales dropped to a record low. Falling oil prices and signals of economic weakness helped lift long-term US Treasury prices in the previous session.
Markets are now watching the Fed’s monetary policy meeting next week. Fed Chair Kevin Warsh, in a recent speech, gave no signal that would change expectations for rates to remain unchanged. Markets are currently pricing in less than a 16% chance of a 0.25 percentage-point rate increase at this meeting. But with inflation still above the Fed’s 2% target, the probability of another rate hike this year is estimated at about 85%.
Other precious metals also declined. Spot silver fell 0.1% to $57.88 an ounce, while platinum and palladium also posted modest losses. The Bloomberg Dollar Spot Index was little changed after falling 0.2% the previous day.
Suehyeon Lee
shlee@bloomingbit.ioI'm reporter Suehyeon Lee, your Web3 Moderator.