Gold slips as firm dollar and higher oil prices pressure metals

what happened

Gold prices pulled back on Monday after reaching their highest level in a week. Reuters reported that spot gold was down 0.5% at $4,172.36 per ounce by 9:44 a.m. EDT (1344 GMT), although it had earlier climbed to its highest level since October 2. US gold futures for December delivery fell 0.5% to $4,196.20 per ounce.

A stronger dollar and rising oil prices weighed on the metal. The US government and bond market were closed on Monday for Columbus Day. “We're seeing some selling pressure in gold because the dollar is near a one-and-a-half-year high,” said Jim Wyckoff, an analyst at American Gold Exchange.

Investors also remained cautious as the Middle East conflict intensified. Markets will later this week assess comments from Fed Chair Kevin Warsh and key inflation figures for indications about future monetary policy. The US Consumer Price Index is due on Wednesday, followed by Producer Price Index and retail sales data on Thursday. Wyckoff said he did not expect the reports to show signs of easing inflation and said they would probably be bearish for metals.

Markets largely expect the Federal Reserve to leave interest rates unchanged later this month, while CME’s FedWatch tool puts the probability of a hike by December at 87%. Oil prices rose to near two-week highs as attacks on Saudi Arabia outweighed the possibility of additional supply after US President Donald Trump praised fresh Russian diesel exports and a Russia-Ukraine energy ceasefire. Spot silver fell 0.5% to $60.51 per ounce, platinum declined 0.2% to $1,684.63, and palladium was unchanged at $1,148.15.

why it matters

Higher interest rates generally make yield-bearing assets more attractive than gold, which does not generate income. This leaves upcoming US inflation figures and expectations for Federal Reserve decisions as important drivers for precious metals and the dollar.

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