The decline followed a 3.5 per cent drop in gold prices so far this week, placing the metal on course for its worst weekly performance since June. Spot gold slipped 0.2 per cent to $4,016.27 per ounce by 0351 GMT, recovering slightly after hitting its lowest level since July 20 earlier in the session.
US gold futures for December delivery also weakened, dropping 0.7 per cent to $4,030.40 per ounce, as investors reassessed the outlook for monetary policy ahead of the Federal Reserve’s upcoming meeting.
Market participants are closely watching the $4,000-per-ounce threshold, which analysts regard as a critical level for gold prices amid uncertainty over inflation, interest rates and the strength of the US dollar.
Monte Safieddine, head of market research at Capital.com, said speculators were attempting to defend the key price level, warning that a decisive break below it could signal a shift in market expectations.
“Speculators are trying to defend the key $4,000 level for gold because a clean break below would signal that the market has stopped pricing rate relief and started pricing sticky inflation, elevated yields, and a stronger dollar,” Safieddine said.
Gold came under additional pressure after oil prices climbed about 4 per cent on Thursday to a five-month high. The rally followed Houthi attacks on Saudi Arabia, raising concerns about further disruptions to global energy supplies.
Higher energy prices can intensify inflationary pressures, potentially prompting central banks to maintain restrictive monetary policies for longer. This outlook tends to weigh on gold, which does not generate interest income and becomes less attractive when interest rates and bond yields rise.
Safieddine warned that further geopolitical tensions could worsen the outlook for bullion by driving energy prices higher and delaying expected monetary easing.
“Any further escalation on the geopolitical front risks pushing oil even higher. Higher oil is reviving inflation fears, lifting yields, and delaying Fed easing. That is a difficult cocktail for bullion,” he added.
Attention has now shifted to the Federal Reserve’s October 27–28 policy meeting and the release of the Personal Consumption Expenditures (PCE) price index, a closely watched measure of inflation and the central bank’s preferred gauge for assessing progress towards its 2 per cent inflation target.
Although traders largely expect the Fed to leave interest rates unchanged at its next meeting, expectations of a rate hike in December remain elevated, with the probability put at 80 per cent.
The prospect of interest rates staying higher for longer has clouded gold’s near-term outlook, as investors weigh the potential impact of persistent inflation against the possibility of future monetary easing.
Elsewhere in the precious metals market, HSBC lowered its average price forecasts for platinum and palladium for 2026, citing changing market fundamentals and investor liquidation, according to a research note published on Thursday.
Spot silver fell 1 per cent to $53.98 per ounce, while platinum slipped 0.1 per cent to $1,568.58. Palladium was broadly steady at $1,054.50 per ounce.
All three metals were also on course to record weekly losses, reflecting broader weakness across the precious metals complex as markets assessed the implications of elevated energy prices, inflation risks and the outlook for US monetary policy.