Gold slips as investors weigh the Fed's rate outlook

what happened

Gold prices eased in early Asian trade on Tuesday as investors waited for the Federal Reserve's policy decision next week and signals on interest rates, according to Reuters. Spot gold lost 0.3% to $4,126.84 an ounce by 0102 GMT, while December US gold futures dropped 0.3% to $4,146.00.

Attention has shifted to the Fed's October 27-28 meeting and the upcoming Personal Consumption Expenditures (PCE) data, a gauge the central bank watches closely against its 2% inflation target. In September the Fed lifted its benchmark rate by 25 basis points to 3.75%-4.00%. CME's FedWatch Tool shows traders see an 83% chance rates stay largely unchanged next week, while the odds of a December hike stand at 94%.

Bank of Japan Governor Kazuo Ueda said underlying inflation is "quite close" to the 2% target, with strong global AI demand adding pressure alongside a tight job market. Among other metals, spot silver slid 0.7% to $56.69 an ounce, platinum held at $1,639.65 and palladium fell 0.7% to $1,112.08.

why it matters

Gold pays no interest, so higher rates raise the opportunity cost of holding bullion and typically weigh on its price. Expectations of a possible December hike make this factor especially relevant for precious metals traders.

market impact

Gold and silver: expectations of tighter Fed policy put pressure on precious metals

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