Gold prices fell during trading today, Friday, on its way to incurring the largest weekly loss in more than four months, driven by the rise in oil prices and the strength of US economic data that strengthened expectations that the Federal Reserve (the US central bank) would keep interest rates high for a longer period.
In spot transactions, the yellow metal fell by 0.1% to record $4,018.69 per ounce, achieving its lowest level since the third of last August. Thus, the weekly decline in the precious metal reached 3.4% since the beginning of the week, recording its largest weekly decline since June. US gold futures for December delivery also fell by 0.6%, reaching $4,033.70.
This decline came as oil prices rose by about 4%, recording their highest level in five months yesterday, Thursday, following the Houthi attacks on Saudi Arabia, which raised concerns about possible disruptions in energy supplies. Rising energy prices enhance inflationary pressures and expectations of continued high interest rates, which raises the opportunity cost of holding non-yielding gold.
In the context of the domestic economy, the number of Americans applying for unemployment benefits fell last week to its lowest level in about 57 years, reflecting a noticeable recovery in job growth during the month of October.
The markets’ attention is currently directed towards the Federal Reserve’s monetary policy meeting scheduled for October 27 and 28, in addition to anticipating the release of personal consumption expenditures data next week. In this context, dealer pricing shows a small probability of no more than 7% that the central bank will raise interest rates next week, while expectations of a rate hike in the December meeting are stable at 81%.
