Gold Rises as Oil Prices Fall and Inflation Fears Ease

Gold prices rose today, as declining oil prices eased inflation concerns, while investors awaited key U.S. inflation data and new signals from the Federal Reserve (the U.S. central bank) this week regarding monetary policy outlooks.

Gold had risen by about 8 percent last week, following the Democrats’ victory in the U.S. midterm congressional elections and growing hopes for an end to the Middle East conflict.

Oil prices fell after U.S. President Donald Trump downplayed the likelihood of new attacks on Iran, but attacks targeting ships near the Strait of Hormuz kept supply concerns alive.

Nikos Tzabouras, an independent financial markets analyst, said, “Gold is rising due to falling oil prices, a weaker dollar, and declining bond yields. The Democrats’ victory has sparked optimism about a potential settlement between the United States and Iran, and may lead to further scrutiny of the artificial intelligence boom, which could help curb inflation and ease the pace of tightening by the Federal Reserve.”

Gold fell 0.3 percent on Friday after U.S. jobs data came in stronger than expected, bolstering expectations that the Federal Reserve might keep interest rates higher for longer, thereby supporting the dollar and U.S. Treasury yields.

A CME Group FedWatch tool indicated that traders now see an 81 percent probability of the U.S. central bank raising interest rates in December, up from 73 percent before the jobs data release.

Markets are now focusing on U.S. consumer price index data due tomorrow, Tuesday, and producer price data on Friday, which could help forecast the Federal Reserve’s next move.

Tzabouras said, “Both the consumer price index and producer price index data will be important for gold’s trajectory. Persistent inflation could reinforce the Federal Reserve’s rationale for further monetary tightening, putting pressure on the precious metal, while any negative surprise in the data could drive further price recovery.”