Gold Prices Rise as Oil Prices Ease Inflation Fears

Gold prices rose on Tuesday as easing oil prices and reduced inflation concerns provided a boost to the market. The yellow metal gained ground as hopes for renewed crude supply flows from the Middle East weighed on oil prices, alleviating fears of immediate policy tightening to combat energy-driven inflation.

Spot gold climbed by 0.3% to $4,151.89 an ounce, while gold futures increased by 0.5% to $4,179.15 an ounce. Shipping data cited by Reuters indicated that Gulf oil exporters managed to surpass pre-war levels for roughly half of September. Kpler data showed that crude exports from the region stood at 18.3 million barrels per day on September 30, exceeding pre-war levels for 14 days last month.

Despite the near-constant threat of attacks on tankers and other commercial vessels, hopes have grown that crude supplies could be making their way out of the Gulf. Iran had moved to restrict the Strait of Hormuz following the outbreak of the war, cutting off a vital waterway through which roughly a fifth of the world’s oil and liquefied natural gas flowed before the fighting began. The conflict has since expanded into other parts of the Gulf, including Yemen, where Iran-backed Houthi militants and Saudi-aligned government forces are grappling for control over the Bab el-Mandeb Strait.

Moderating oil prices, combined with a pledge by the Group of Seven countries to release emergency energy reserves, could relieve some of the pressure on the Federal Reserve to quickly raise interest rates. The Fed is anticipated to skip a rate hike at its October meeting before lifting borrowing costs in December. The prospect of a delayed rate rise could benefit gold by decreasing the opportunity cost of holding the non-yielding asset. Additionally, a retreat in the U.S. dollar following a fresh selloff on Monday gave additional support to gold.

ANZ analysts noted that gold has recovered from last week’s sharp decline as investors reassess rising fiscal pressures globally. They also pointed to lower expectations for rate hikes following weaker payrolls data, with markets now assigning roughly a 20% chance of an October hike, down from around 70% a week earlier.