Rising oil prices intensify inflation concerns, gold prices pressured to a four-day low

1. On Tuesday, gold prices edged down slightly due to concerns that high oil prices are intensifying inflation worries. Spot gold once fell 0.45% to $4,106.22 per ounce, hitting a four-day low. Investors are waiting for next week’s Federal Reserve policy meeting for new signals on the outlook for US interest rates.2. Analysts said that the emergence of certain geopolitical issues in the Middle East has put upward pressure on oil prices, causing gold prices to come under pressure at the start of this week. Brent crude broke above $110 per barrel on Monday, reaching the highest level since May 20, and hovered near a five-month high on Wednesday. Traders are pricing in the geopolitical risk premium following claims by Houthi forces of multiple attacks on Saudi energy, airport, and military targets on Monday.3. Rising energy prices often reinforce market expectations that the Federal Reserve will maintain higher interest rates for longer to curb inflation. Although gold is considered a hedge against inflation, higher interest rates increase the opportunity cost of holding non-interest-bearing gold, thus diminishing its appeal.4. Recent statements by Federal Reserve officials indicate there is not a strong urgency for further tightening, reducing expectations for an interest rate hike at the October 27-28 meeting. However, CME FedWatch tool shows that traders still see a 92% probability of a rate hike in December. Analysts point out that regardless of the Fed’s actions, the market could see substantial volatility; if the Fed keeps rates unchanged, the initial reaction may provide support to gold.5. On the other hand, Bank of Japan Governor Kazuo Ueda stated that the underlying inflation rate is “fairly close” to the central bank’s 2% target. He added that robust global demand for artificial intelligence is intensifying inflation pressure from labor market tightness, which suggests there is still room for further rate hikes in the future.