With a Fed hold widely expected, gold’s next move hinges on tone: any signal that a December hike remains live would likely lift yields and the dollar and push bullion back below $4,000, while a more balanced message could trigger a relief bounce from oversold levels. Oil is the key transmission channel, and further escalation in the Middle East that lifts crude would likely weigh on gold through higher inflation and rate expectations rather than support it as a haven. A softer PCE print on Thursday would offer the clearest route to a short-covering rally. Silver and gold miners, which underperformed last week, are likely to move with higher beta in either direction.
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Gold is being sold on the very geopolitical risk that once lifted it, as oil-driven inflation fears keep Fed hikes in play, leaving $4,000 as the line to watch in a pivotal week.
Summary:
- Spot gold fell about 4% last week, its steepest weekly decline in more than four months, and settled around $4,010 after briefly dipping below $4,000 for the first time since mid-July
- Oil above $100 a barrel on intensifying Middle East hostilities revived inflation fears and kept a December Fed hike in play
- A firmer dollar, Treasury yields near 5% and margin-call selling linked to the tech selloff added to the pressure; silver fell to a near one-year low
- UBS said gold could retest $4,000 but expects structural dip-buyers to form a floor there; HSBC cut its 2026 platinum and palladium forecasts
- The Fed decides on Wednesday, with markets heavily favouring a hold at 3.75%-4.00%; US PCE inflation follows on Thursday
Gold heads into a pivotal week for US monetary policy on the back foot, after suffering its steepest weekly decline in more than four months and briefly slipping below $4,000 an ounce as surging oil prices revived inflation fears and reinforced expectations that the Federal Reserve will keep rates high.
Spot gold fell about 4% over the week to October 23, touching a three-month low near $3,975 on Friday before settling around $4,010. It was the first time the metal had traded below $4,000 since mid-July, and the move extended a decline that began in late August, when prices peaked near $4,700. Silver fared worse, falling to its lowest level in nearly a year.
Oil was the main driver. Crude climbed above $100 a barrel as hostilities in the Middle East intensified, stoking concerns that energy costs will keep inflation elevated. That outlook has kept a December Fed rate hike on the table and lifted the opportunity cost of holding non-yielding bullion, outweighing any safe-haven demand from the conflict. A firmer dollar and US Treasury yields hovering around 5% added to the pressure, while analysts said a selloff in technology shares triggered margin calls that forced some investors to sell gold and silver to cover losses.
The $4,000 level has become the market’s focal point. One analyst said speculators are defending it because a clean break would signal that markets have stopped pricing rate relief and started pricing sticky inflation, high yields and a stronger dollar. UBS analyst Giovanni Staunovo struck a more constructive tone, saying that while gold could retest $4,000 in the near term, structural dip-buyers are expected to provide a firm floor around that level. Elsewhere in the complex, HSBC cut its average 2026 platinum and palladium price forecasts in a note last week, citing shifting market fundamentals and investor liquidation.
Attention now turns to the Fed, which announces its decision at 14:00 ET (18:00 GMT) on Wednesday after a two-day meeting. Markets heavily favour a hold at 3.75%-4.00% following September’s hike, leaving the statement and Chair’s press conference to set the tone on further tightening. US PCE inflation data follow at 08:30 ET (12:30 GMT) on Thursday. Together, the two events are likely to decide whether $4,000 holds or gives way to a deeper correction.
This article was written by Eamonn Sheridan at investinglive.com.
