High oil prices reinforce inflation concerns, gold prices come under pressure and fall.

1. On Tuesday, gold prices fell due to concerns that strengthening oil prices would intensify inflation worries. Spot gold once dropped by 0.6% to $4,115.50 per ounce, reaching a three-day low. Investors are waiting for next week’s Federal Reserve policy meeting for new signals on the outlook for US interest rates. 2. Analysts stated that some geopolitical issues in the Middle East are intensifying, putting upward pressure on oil prices and also weighing on gold prices at the start of the week. Brent crude hit a five-month high, as traders priced in the geopolitical risk premium after the Houthis claimed to have attacked Saudi Arabian energy, airport, and military targets on Monday. 3. Rising energy prices typically reinforce market expectations that the Federal Reserve will keep interest rates higher for a longer period to curb inflation. While gold is regarded as an inflation hedge, higher interest rates increase the opportunity cost of holding non-interest-bearing gold, thus weakening its appeal. 4. Recent statements from Federal Reserve officials indicate little urgency for further policy tightening, reducing market expectations of a rate hike at the October 27–28 meeting. However, the CME FedWatch tool shows traders still believe there is a 92% probability of a rate hike in December. Analysts point out that regardless of the Federal Reserve’s actions, the market may experience significant volatility; if the Fed keeps rates unchanged, the initial response could support gold prices. 5. On the other hand, Bank of Japan Governor Kazuo Ueda said that the underlying inflation rate is now “quite close” to the central bank’s 2% target, and strong global demand for artificial intelligence has intensified inflationary pressures in a tight labor market, implying there is still room for further interest rate hikes in the future.