Gold holds near $4,020 as silver sinks and UBS highlights $4,000 support

Spot gold prices showed minimal movement in early US trading on Friday, remaining close to levels seen after Thursday’s significant losses. Gold was quoted at $4,020 per ounce, slipping 0.1%. In contrast, silver experienced a sharper decline, trading at $54 per ounce with a drop of just over 1% for the day.

Inflation concerns and Fed policy keep pressure on bullion

Heightened tensions in the Middle East have pushed oil prices to new highs, amplifying worries about inflation and reinforcing expectations that the Federal Reserve will keep monetary policy tight. Brent crude briefly neared $115 per barrel, the highest in five months, while West Texas Intermediate surpassed $100.

Gold, long regarded as a safe-haven asset, has struggled to attract sustainable defensive buying this week in spite of rising geopolitical risks and continued weakness across global equity markets. Investors appear cautiously positioned, with gold unable to benefit substantially even as bond yields soften.

Silver has come under additional pressure, as both higher borrowing costs and surging energy prices raise doubts over the strength of industrial activity. The precious metal’s heavier decline reflects its closer ties to manufacturing demand.

As inflation risks linger, market participants expect the Fed to leave rates unchanged at its October 27-28 meeting. However, interest rate futures continue to signal around a 78% probability of at least one more increase by December. Persistent expectations for firm US rate policy, coupled with volatile crude prices and continued selling across precious metals, have prevented gold from staging a classic flight-to-safety rally.

Middle East conflict complicates safe-haven flows

Renewed hostilities in the Middle East have reawakened fears over energy supply security in the Persian Gulf, despite producers’ efforts to reroute exports via alternative infrastructure. The risk of military escalation and further disruptions has historically lent support to safe-haven assets such as gold. However, this time, elevated oil prices also raise the outlook for sustained inflation, which could prompt the Fed to hold or even lift rates longer than previously expected.

This complex environment has muted gold’s typical safe-haven move. Some market participants have chosen to direct defensive capital toward US government bonds, with rising Treasury yields further dampening demand for non-yielding gold.

Silver, closely linked to industrial cycles, has encountered intensified selling as traders worry that heightened energy costs and tighter US monetary policy could lead to a slowdown in manufacturing activity.

UBS maintains positive long-term view for gold

UBS, a leading global financial services firm based in Switzerland, has weighed in on the current price action. Strategist Giovanni Staunovo stated that gold remained notably resilient to the rise in yields, but acknowledged potential short-term vulnerability around support levels.

UBS strategist Giovanni Staunovo wrote that gold may retest support near $4,000 per ounce, with long-term buyers likely to build positions at that level.

UBS expects that, if prices retreat toward $4,000, structural dip buyers could step in to stabilize the market. The bank’s longer-term outlook remains constructive, citing central banks’ ongoing diversification of reserves, rising concerns about global public debt, potential for a weaker US dollar, and continued purchases from China as sources of medium-term strength.

UBS projects annual central bank gold buying between 750 and 1,000 metric tons, a pace seen as providing a solid demand base and a buffer against short-term volatility.

Mini dictionary: UBS is a multinational investment bank and financial services company headquartered in Switzerland. It provides wealth management, asset management, and investment banking services to clients worldwide.