Gold prices held steady near record territory on Tuesday, October 20, as investors weighed the outlook for US interest rates ahead of a Federal Reserve meeting that markets expect to be uneventful, and a December meeting that many now expect will bring a rate increase.
Spot gold was up 0.1% at $4,145.22 an ounce as of 03:47 GMT, according to Reuters, while US gold futures for December delivery rose 0.1% to $4,164.70. Earlier in the Asian session, other reports put spot gold slightly lower, around $4,119, underlining the narrow range in which the metal has been trading.
Silver rose 0.7% to $57.48 an ounce, platinum gained 0.7% to $1,651.25, and palladium slipped 0.2% to $1,117.87.
The Fed in focus
The direction of US monetary policy is the dominant influence on gold right now. According to the CME FedWatch tool, traders see an 82% chance that the Federal Reserve will leave rates unchanged at its October 27-28 meeting. But they put the odds of a rate hike in December at 89%.
That expectation reflects persistent inflation in the United States. Consumer prices rose 3.7% in September from a year earlier, up from 3.4% in August, as high energy costs and other pressures kept inflation well above the Fed's 2% target. Fed Chair Kevin Warsh has given little guidance on the path ahead, after the central bank raised rates in September.
Higher interest rates typically weigh on gold, because the metal pays no interest and becomes less attractive relative to bonds and deposits when yields rise. A stronger dollar, which often accompanies higher US rates, also makes gold more expensive for buyers using other currencies.
"The interesting dynamic is that there's going to be a big move, no matter what the Fed does," said Kyle Rodda, an analyst at Capital.com. He suggested that an initial reaction to rates being held unchanged could support gold.
Why gold remains near record highs
Despite the prospect of higher rates, gold has remained at historically elevated levels above $4,000 an ounce. Several factors have supported prices.
Geopolitical tensions have kept demand for safe-haven assets strong. Conflict in the Middle East, attacks on shipping in the Strait of Hormuz, the war in Ukraine and political unrest in parts of Europe have all encouraged investors to hold gold as protection against uncertainty.
Central banks have been major buyers. Over the past several years, central banks in emerging markets, including China, India, Turkey and Poland, have added large amounts of gold to their reserves, seeking to diversify away from the US dollar.
Concerns about government debt and inflation have also supported gold. Bond yields in the United States, Germany and Japan have reached multi-decade highs this year, reflecting worries about large fiscal deficits. Some investors see gold as a hedge against the risk that governments will tolerate higher inflation to manage their debts.
Wider market backdrop
Gold's steadiness came amid volatility in other markets. Asian stocks fell sharply on October 20, with South Korea's Kospi down 3.6%, as investors awaited earnings from major technology companies including Meta and Tesla that will test the strength of the AI investment boom. On Wall Street the previous day, chip stocks had rebounded, ending their longest losing streak since 2008.
