Gold prices dipped in early Asian trading on Tuesday as investors braced for the US Federal Reserve's policy decision next week. The move will set the tone for interest rates and broader monetary policy. Spot gold fell 0.3% to $4,126.84 per ounce by 0102 GMT, while US gold futures for December delivery dropped 0.3% to $4,146.00.
Market attention is now focused on the Fed's October 27-28 meeting and next week's US Personal Consumption Expenditures (PCE) data. The PCE is a key inflation gauge closely monitored by the central bank as it aims for 2% inflation. In September, the Fed raised its benchmark overnight interest rates by 25 basis points to the 3.75%-4.00% range. According to CME's FedWatch Tool, traders are pricing in an 83% chance that the central bank will leave rates unchanged next week, while expectations for a hike in December remain at 94%.
Bank of Japan Governor Kazuo Ueda noted that underlying inflation is 'quite close' to the central bank's 2% target. He cited strong global AI demand and a tight job market as inflationary pressures, signaling potential for further rate increases. Higher interest rates typically weigh on gold prices by increasing the opportunity cost of holding non-interest-bearing bullion.
On the geopolitical front, Yemen's Iran-aligned Houthis claimed several attacks against Saudi energy, airport, and military targets on Monday. Among other metals, spot silver slid 0.7% to $56.69 per ounce, platinum steadied at $1,639.65, and palladium dropped 0.7% to $1,112.08.