Bullion Gains as the Dollar Eases
Gold moved modestly higher on Tuesday, drawing support from a weaker U.S. dollar as traders turned their attention to the Federal Reserve's policy gathering next week for signals about where borrowing costs go from here. Spot gold added 0.1% to reach $4,145.22 per ounce by 0347 GMT, and U.S. gold futures for December delivery also climbed 0.1%, touching $4,164.70. A softer dollar makes dollar-denominated bullion cheaper for buyers paying in other currencies, which can lift demand.[S1]
Kyle Rodda, a senior financial market analyst at Capital.com, described the setup as one where a significant price swing is likely regardless of the Fed's choice, and he argued that an initial reaction could favor gold if policymakers leave rates where they are. The dollar index slipped below 102 on Tuesday, according to one market report, while another described the greenback index as softening.[S1][S2]
Rate Expectations Split Between October and December
Recent remarks from Fed officials have suggested little urgency to tighten policy further, which has reduced the likelihood traders attach to a rate increase at the October 27-28 meeting. CME's FedWatch Tool showed an 82% probability of no change next week, while the chance of a December hike stood at 89%, according to one report. A separate market account put the odds of a hold next week at 83% and the likelihood of a December increase at 94%.[S1][S2]
Higher interest rates tend to pressure gold because they raise the opportunity cost of holding an asset that pays no yield. Investors are also watching the PCE price index, the inflation gauge the Fed prefers, for further direction. Fed Chair Kevin Warsh declined on Friday to preview the outcome of this month's FOMC meeting, though he said stronger-than-expected inflation had not altered his view of the U.S. economy.[S1][S2]
Other Metals and Cross-Market Signals
Among other precious metals, spot silver gained 0.7% to $57.48 per ounce and platinum rose 0.7% to $1,651.25, while palladium eased 0.2% to $1,117.87. Rodda noted that reduced Middle East tensions and lower oil prices could give gold an additional lift. Oil, however, was trading higher on Tuesday, with Brent near a five-month peak after Yemen's Iran-aligned Houthis said on Monday they had launched several attacks on Saudi energy, airport and military targets.[S1]
Bank of Japan Governor Kazuo Ueda remarked that underlying inflation has come very near the central bank's 2% goal, and that strong worldwide appetite for artificial intelligence is intensifying price pressures already created by a tight labor market — conditions he described as leaving scope for additional rate hikes. Even so, the yen slid after those hawkish comments, while the euro edged higher as European authorities moved to curb unrest that escalated into violence over the weekend.[S1][S2]
