Gold Prices Fall to Three-Month Low Amid Inflation Fears and Fed Rate Hike Expectations

Key summary

New York gold futures dropped to a three-month low on Friday (October 23) after rising energy prices fueled inflation concerns and increased expectations that the US Federal Reserve would raise interest rates at next week's policy meeting. COMEX December delivery gold contracts fell $52.50, or 1.29%, closing at $4,007.90 per ounce. The weekly decline of 4% marks the worst performance since June. Brent crude oil prices surged to a five-month high following Houthi attacks in Saudi Arabia, raising supply disruption fears. Analysts noted that heightened inflation concerns suggest major central banks may not ease monetary policy as quickly as desired, pressuring gold markets. Additionally, heavy selling in technology stocks triggered margin calls, forcing traders to sell assets like gold for liquidity. On Friday, the S&P 500 and Nasdaq indices fell to five-week lows amid cautious investment sentiment after AI-related stocks were heavily sold. Most traders expect the Fed to hold rates at its October 27-28 meeting despite higher-than-expected US consumer and producer inflation data released last week, which supports tighter policy later this year. CME's FedWatch tool shows a 92% probability of a rate hold next week and a 78% chance of a December rate hike. The Federal Reserve's preferred PCE inflation report is scheduled for release on October 29 to further clarify monetary policy trends.