Gold prices held steady around $4,375 an ounce as traders assessed the ongoing risk of inflation and the future direction of interest rates. This follows the Federal Reserve's first interest rate hike since 2023, a quarter-percentage-point increase at their September 15-16 meeting, which was a unanimous decision. The Fed's move aims to curb inflation that has been above its 2% target for over five years. Investors are closely watching for comments from several Fed policymakers this week for clues on the pace of future rate adjustments.
Minneapolis Fed president Neel Kashkari stated on Sunday, September 20, that inflation remains excessively high and has broadened beyond the oil price shock from the Iran war, affecting various sectors of the economy. Chicago Fed president Austan Goolsbee and New York Fed president John Williams are also scheduled to speak. Elevated energy prices, influenced by Middle East supply risks and potential US-Iran diplomatic talks, reinforce expectations for sustained high interest rates. Such an environment is generally negative for non-yielding assets like gold.
While gold saw a moderate gain the previous week, its price stability reflects a balancing act between inflation concerns and the impact of rising interest rates. Higher rates typically reduce the appeal of non-yielding bullion by making interest-bearing assets more attractive. The Bloomberg Dollar Spot Index, a measure of the US currency, was largely unchanged after a 1% rise the prior week. Other precious metals such as silver, platinum, and palladium saw slight increases.
