Gold prices declined on Wednesday as investors evaluated the Federal Reserve’s monetary policy outlook ahead of the latest US Consumer Price Index (CPI) report. Escalating tensions in the Middle East also raised concerns about energy supply disruptions, potentially driving oil prices higher and sustaining inflationary pressures that could keep interest rates elevated.
At 13:51 WIB, spot gold (XAU/USD) fell 0.3% to $4,148.79 per ounce, while US gold futures edged lower to $4,171.75. Spot silver (XAG/USD) dropped 0.9% to $58.6645 per ounce, and platinum (XPT/USD) declined 0.2% to $1,662.06. In contrast, palladium (XPD/USD) gained 0.6% to $1,133.61, while palladium futures advanced 0.5% to $1,132.50. The US Dollar Index slipped 0.1% to 102.12.
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Higher Oil Prices Pressure Gold
Gold extended its losses for a second consecutive session, declining approximately 0.8% as renewed attacks in the Middle East heightened concerns about potential energy supply disruptions and persistent inflation.
Brent crude oil traded above $106 per barrel, increasing the risk that rising energy costs could complicate the inflation outlook and strengthen the case for tighter monetary policy. If inflation remains elevated, the Federal Reserve could face greater challenges in easing financial conditions, potentially limiting gold’s recovery.
Fed Interest Rate Expectations in Focus
Gold generally faces downward pressure when interest rates and bond yields rise because it does not generate interest income. Higher yields increase the opportunity cost of holding non-yielding assets, potentially reducing demand for gold among investors.
Since the US-Iran war erupted in late February, gold has reportedly fallen by approximately 20% from its earlier levels, as concerns about energy-driven inflation and expectations of tighter monetary policy weighed on prices.
The Federal Reserve raised interest rates last month for the first time since 2023, keeping monetary policy firmly in focus. Investors are now awaiting Wednesday’s US CPI report for September to assess the latest inflation trends and gain further insight into the Fed’s potential policy decisions.
Interest rate swaps indicate that markets see a relatively low probability of another rate hike at the October meeting. However, traders are pricing in approximately a 90% chance of an increase in December, reflecting continued concerns about persistent inflation.
Gold Correction Preserves Long-Term Outlook
Rick Kanda, managing director of The Gold Bullion Company, noted that gold’s strong performance following a record-breaking 2025 helped propel prices to an all-time high of approximately $5,560 per ounce in January.
However, prices subsequently retreated to around $4,185 on October 12, falling below several institutional forecasts for year-end levels.
According to Kanda, the recent correction does not necessarily undermine gold’s long-term bullish outlook. Despite the pullback, prices remain historically elevated, while consolidation following a substantial rally does not automatically indicate a deterioration in the metal’s underlying fundamentals.
Looking ahead, gold traders will closely monitor the US CPI report, Federal Reserve interest rate expectations, US Treasury yields, and geopolitical developments in the Middle East. These factors are likely to influence near-term price movements and determine whether gold can regain its upward momentum.