Gold prices edged higher on Monday as softer oil prices offered support, while investors assessed the chances of a Federal Reserve interest rate hike later this year and looked for fresh signals on the U.S. central bank’s policy trajectory.
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Gold prices edged higher on Monday as lower oil prices alleviated inflation concerns ahead of next week’s Federal Reserve monetary policy meeting, where the central bank is widely expected to hold interest rates steady.
Spot gold rose 0.2% to $4,171.65 per ounce by 0853 GMT. US gold futures for December delivery rose 0.26% to $4,191.90 per ounce.
“Lower oil prices are easing pressure on the Fed, which is supportive for gold. What is notable is that gold is holding up even as the dollar strengthens, as demand for safe-haven assets is benefiting both,” said UBS analyst Giovanni Staunovo.
Oil prices slipped from a five-month high on Monday after US President Donald Trump waived sanctions and tariffs on Russia that may lead to more Russian fuel exports.
The drop in oil prices eased some inflation concerns after strong US CPI and PPI readings last week, driven in part by a surge in gasoline costs.
Investors now await next week’s Fed meeting and US PCE data, the central bank’s preferred gauge of inflation.
“We expect the Fed to stay on hold this time, so the meeting itself may not be a major driver for gold. The key will be what the incoming inflation and labour-market data say about the path for rates,” Staunovo added.
According to the CME’s FedWatch Tool, traders are pricing in only a 15% chance of a rate hike this month, while expectations for a December increase remain high at 89%.
While gold is typically considered a hedge against inflation, higher interest rates reduce the appeal of the non-yielding asset.
Elsewhere, the European Central Bank is likely to raise interest rates by 25 basis points at least one more time this year to fight inflationary pressures, the International Monetary Fund said on Friday.
