Gold Prices Fall Again Ahead of Fed Interest Rate Decision
Gold prices fell again in early Asian trading on Tuesday as investors awaited the US Federal Reserve's upcoming interest rate decision and key inflation data.
Spot gold fell 0.3% to $4,126.84 an ounce at 7:02am Bangladesh time on Tuesday (October 20). US gold futures for December delivery also declined 0.3% to $4,146 an ounce.
Investors are focusing on the Federal Reserve's monetary policy meeting scheduled for October 27–28. They are also awaiting the US personal consumption expenditures (PCE) price index, due next week. The index is a key measure of inflation and plays an important role in the Fed's policy decisions. The central bank has an inflation target of 2%.
In September, the Fed raised its benchmark interest rate by 25 basis points to a range of 3.75%–4%. According to the CME FedWatch Tool, market participants see an 83% probability that the Fed will keep rates unchanged at its upcoming meeting. Meanwhile, the probability of a rate hike in December is estimated at 94%.
Higher interest rates generally put pressure on gold prices because the precious metal does not pay interest. As rates rise, the opportunity cost of holding gold increases, making interest-bearing assets relatively more attractive to investors.
Investors are also monitoring geopolitical developments. On Monday, Iran-backed Houthi rebels in Yemen claimed to have carried out multiple attacks targeting energy facilities, airports and military sites in Saudi Arabia. Such developments can influence demand for safe-haven assets, including gold.
Among other precious metals, spot silver fell 0.7% to $56.69 an ounce. Platinum remained almost unchanged at $1,639.65 an ounce, while palladium declined 0.7% to $1,112.08 an ounce.