Gold prices moved closer to $4,200 per ounce on Monday as a decline in oil prices provided fresh momentum, even as investors continued watching for further policy tightening from the Federal Reserve later this year.
Oil price dip influences gold movement
Spot gold rose 0.3% to $4,175.60 by 0259 GMT, and December US gold futures gained 0.4% to $4,196.40. The uptick in gold followed President Donald Trump’s decision to waive select sanctions and tariffs impacting Russia, potentially increasing the flow of Russian fuel into global markets.
Historically, easing geopolitical tensions might reduce demand for gold as a safe-haven asset. However, traders appeared focused on the potential impact of lower energy costs, which could help relieve inflationary pressures and lessen the urgency for additional US rate hikes.
Brent crude oil dropped nearly 1.8% to $107.92, pulling back from levels above $110 reached on Friday as markets considered the implications of expanded Russian exports.
Despite the decline, the supply outlook remains uncertain. US authorities are set to review the economic consequences of the new measures over the next 60 days, while maritime security risk lingers due to ongoing attacks on commercial vessels near the Strait of Hormuz.
Tim Waterer, chief market analyst at KCM Trade, linked gold’s modest advance to a reduction in energy costs, emphasizing that a deeper drop in oil or US Treasury yields could provide stronger support for gold prices in the coming weeks.
The impact is transmitted largely via interest rate expectations. Cheaper fuel may temper inflation, reducing the impetus for further Federal Reserve tightening and lowering the opportunity cost of holding non-interest-bearing gold.
This supportive factor could outweigh the decline in gold’s lure as a geopolitical hedge, as long as oil continues its retreat.
Mini dictionary: KCM Trade is a global online trading firm specializing in multi-asset financial products, including commodities, forex, and indices, and is known for market analysis and client education.
Federal Reserve’s next move and inflation signals
The consensus in financial markets suggests the Federal Reserve is likely to pause in October, but expectations for a December interest rate increase remain strong. On Monday, traders priced in a 16% chance of a rate hike in October and a 92% likelihood of tightening by December.
Federal Reserve Chair Kevin Warsh refrained from signaling next steps at last week’s policy gathering, leaving room for speculation ahead of the upcoming October 27–28 meeting. Meanwhile, US consumer inflation reached 3.7% for September, and producer prices recorded a 6.3% year-on-year jump.
Trent Saunders, a senior analyst at Commonwealth Bank of Australia, stated that persistent inflation surprises have led investors to adjust their forecasts for additional US rate increases.
Repeated higher-than-expected inflation readings have pushed market participants to reconsider the pace and extent of future Federal Reserve rate hikes.
The next US personal consumption expenditures inflation report is set for October 29, following the Fed’s late October meeting. This schedule indicates that any rate pause announced in October may not resolve questions about US monetary policy heading into December.
ETF inflows and gold’s technical resistance
December gold futures hovered close to the $4,200 resistance mark, while spot gold remained marginally below that level. Closing above $4,200 could reinforce bullish sentiment, whereas a failure might shift focus back to support levels at around $4,100.
Data from the World Gold Council show that gold-backed exchange-traded funds (ETFs) attracted $10 billion in inflows during September, even as gold prices fell by 8.5%. Total ETF holdings grew by 67 tonnes to a new peak of 4,256 tonnes.
In contrast, futures traders decreased their net managed-money exposure by roughly $12 billion over the same period. This reduction was attributed to higher yields and a stronger US dollar, which encouraged liquidation of gold positions.
Johan Palmberg, an analyst at the World Gold Council, described this divergence between ETF inflows and futures outflows as a defining aspect of September’s market dynamics.
Both ETF demand and futures positioning indicate that market support for gold could revive if US yields fall alongside robust fund inflows.
If oil prices recover or concerns over Fed tightening increase, analysts say gold may face another hurdle in surpassing the $4,200–$4,235 resistance.
| Market | September Inflow/Outflow | Holdings/Exposure |
|---|---|---|
| Gold ETFs | +$10 billion | 4,256 tonnes (record high) |
| Managed-money futures | -$12 billion | Reduced by investors |
