Gold Prices Stabilize Near 3-Month Low Ahead of Federal Reserve Meeting

Gold prices found a footing in Asian trading on Monday after suffering a significant sell-off last week, with market focus now squarely on this week's Federal Reserve monetary policy meeting. The precious metal is trading near a three-month low as investors weigh the impact of elevated energy prices and persistent inflation on the central bank's interest rate path.

Weekly Performance and Key Levels

Spot gold was trading 0.2% higher at $4,005.41 an ounce, while U.S. gold futures gained 0.3% to $4,017.45 as of 02:28 ET, according to Investing.com data. The slight recovery follows a difficult prior week for the metal:

• Bullion slid 4.1% last week, its worst weekly performance in months.
• Prices broke below the psychologically important $4,000 level on Friday for the first time since mid-July.

Pressure from Yields and Inflation

The primary headwind for gold remains the high interest rate environment. The 10-year U.S. Treasury yield holding near 5% increases the opportunity cost of holding non-yielding assets like gold, making interest-bearing instruments more attractive to investors.

A recent surge in oil prices, driven by geopolitical tensions in the Middle East, has amplified concerns about persistent inflation. While gold is traditionally seen as an inflation hedge, the prospect of prolonged price pressures could force the Federal Reserve to maintain its restrictive monetary policy for longer, weighing on bullion prices.

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All Eyes on the Fed

Investors are widely anticipating that the Fed will keep interest rates unchanged at the conclusion of its meeting on October 28. However, the market's attention will be on the central bank's forward guidance and signals regarding its December decision.

According to the CME FedWatch tool, markets are pricing in approximately a 78% probability of another rate hike in December. Before that decision, policymakers and investors will scrutinize the upcoming Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, due for release on October 29.

Other Metals

Other precious metals saw mixed performance. Silver prices were largely unchanged at $53.95 per ounce, while platinum fell 0.6% to $1,543.71 per ounce. In industrial metals, benchmark copper futures on the London Metal Exchange edged down 0.4%.