Gold rises as cheaper oil lifts hopes for a Fed pause

Dubai: Gold inched up on Monday, October 12, as falling oil prices calmed worries about inflation. Traders now see a better chance that the US Federal Reserve will hold off on more interest rate hikes. 

Globally bullion is trading slightly lower at $4,190.15 after it breached the $4200 mark in early morning trade on Monday. In the UAE, prices have stayed stable through the weekend. 24-karat gold holds above Dh500 at Dh505.50, 22-karat is now priced at Dh468, 18-karat at Dh384.75 and 14-karat has inched up towards Dh300.

Oil is the main driver. Brent crude eased to about $103 a barrel (Dh378). Traders expect less pressure on supply and costs after President Donald Trump said Russia and Ukraine had agreed to an energy ceasefire. However, both sides haven’t divulged much details on the same. Bond markets managed to help commodities too. Yields on 30-year US Treasuries fell on Friday, giving some respite. The US debt markets are closed on Monday for a holiday. 

Buyers are also stepping in. Gold-backed exchange-traded funds added holdings last week. China’s central bank has been buying gold at a faster pace.

Even so, gold remains well below its earlier levels. It has lost about a fifth of its value since the US-Iran war began in late February. Disrupted Middle East energy supplies have kept inflation risks high, and some central banks have raised rates in response. Higher rates hurt gold because it pays no interest.

Investors will look for clearer signals this week. US inflation data is due on Wednesday, October 14. On Thursday, October 15, Fed Chair Kevin Warsh joins a discussion at the International Monetary Fund’s annual meeting in Bangkok. Fed Governor Christopher Waller and Cleveland Fed President Beth Hammack will also speak.

More importantly all eyes will be on the developments in the middle-east as further escalation of tensions between Saudi and the Houthis could trigger further uncertainty.