[Financial Recap] Gold Slips Below $4,000 as Bulls’ Defence of Key Support Faces a Busy Week of Central Bank Decisions!

A three-month low below the psychologically important $4,000-per-ounce threshold left spot gold with its biggest weekly loss in more than four months last Friday. Monday’s opening trade brought little change: prices remained close to $4,000, while sentiment showed scant improvement following the weekend.

Gold’s weakness has largely reflected a persistent climb in energy prices, a revival of inflation worries and a reassessment of the Federal Reserve’s policy outlook. Geopolitical uncertainty has further complicated the picture, as has a crowded calendar of central bank decisions this week.

For gold bulls, mounting concern about inflation presents a clear challenge: major central banks may have less room to ease policy at the pace previously envisaged. A steep sell-off in technology stocks, notably AI-related shares, has also created margin pressures. Faced with margin calls, some equity traders and investors have raised cash by selling their gold holdings, increasing the pressure on precious metals.

The Federal Reserve’s policy meeting on October 27–28 dominates this week’s market agenda. A decision to maintain rates at 3.75%–4.00% is the broad expectation among traders, and the FedWatch tool at one point assigned that outcome a probability above 90%. Despite this, pricing still implies a considerable chance of a December rate rise, with the probability close to 80%.

Consumer and producer inflation readings published previously both surpassed forecasts, lending weight to the view that interest rates will remain “higher for longer”. Due later this week, the personal consumption expenditures (PCE) price index will offer another indication of inflation trends and is the Fed’s preferred gauge. If the reading is stronger, persistently high oil prices could reinforce its effect, prompting more bets on further rate rises and leaving gold under pressure.

Interest rate announcements from the European Central Bank, Bank of Japan, Reserve Bank of New Zealand and Bank of Canada will accompany the Fed’s decision this week. The combined schedule makes this an important week for monetary policy worldwide.

Political and fiscal worries in France have already put pressure on the euro, even as expectations broadly favour no change in ECB rates. September brought Japan’s first core inflation reading above the 2% target in nine months, adding to the case for more tightening in the near term. A December rate rise by the Bank of Japan is therefore now more widely expected. Through their effects on exchange rates and global liquidity conditions, small changes in these policy signals could have implications for gold prices.

Gold Retains Structural Support but Faces Near-Term Constraints:

Some underlying support for gold persists over the longer term. Its medium- to long-term outlook continues to benefit from uncertainty over geopolitical conflicts worldwide, growing fiscal deficits in major economies and demand from central banks seeking to hold gold in their reserves.

Real interest rates and the US dollar, however, carry greater weight in the near term. Until markets cease to factor in the possibility of a further Federal Reserve rate rise before year-end, the scope for gains in gold is likely to be restricted.