Another Sharp Decline in Global Gold Prices

Gold prices have fallen in the global market. Rising fuel prices and surging inflation in the United States have strengthened the likelihood that the Federal Reserve—the U.S. central bank—will raise interest rates. This has exerted a negative impact on the gold market.

As of 1:40 PM Bangladesh time on Friday (October 30), the spot price of gold had dropped by 0.9% to $3,982.85 per ounce. Meanwhile, U.S. gold futures for December delivery fell by 1% to $3,992.50 per ounce. Consequently, gold is on track for both a weekly decline and a second consecutive monthly drop.

Tim Waterer, chief market analyst at KCM Trade, noted that the decline in gold prices has challenged the key technical support level of $4,000. In the past, investor buying interest during price dips helped halt such declines; it remains to be seen whether that trend will help the gold market recover this time.

He added that macroeconomic data from the U.S. this week has provided positive signals, reinforcing the possibility of a Federal Reserve interest rate hike in December. Combined with high fuel prices, this has made gold less attractive to investors concerned about inflation.

Inflation in the U.S. rose in September, driven by higher costs for various goods, including gasoline, which in turn increased consumer spending. This has strengthened economists' expectations for an interest rate hike in December.

Generally, when interest rates rise, the opportunity cost of holding non-yielding assets like gold increases, making the metal less appealing to investors.

According to data from the CME FedWatch Tool, market participants estimate a roughly 72% probability that the Federal Reserve will raise interest rates in December.

Meanwhile, global fuel prices rose on Friday, with oil on track to record its fourth consecutive monthly gain. An attack on an oil tanker in the Strait of Hormuz has highlighted supply risks stemming from the potential for conflict between Iran and the United States and Israel.

Meanwhile, in Tokyo, Japan’s capital, the annual core inflation rate in October surpassed the 2 percent target set by the country’s central bank. Data released on Friday indicates that inflationary pressures are continuing to mount.

Along with gold, the prices of other precious metals have also declined. In the spot market on Friday, the price of silver fell by 3.1 percent to $50.74 per ounce. Platinum prices dropped by 3.3 percent to $1,439.05, while palladium prices fell by 2.3 percent to $982.50. All three metals are also on track for weekly and monthly losses.

Source: Reuters