Gold Prices Rise as Oil Softens, US Midterm Elections in Focus
Bullion gains for a second session as investors assess the impact of softer crude prices, central bank interest rate expectations and the US midterm elections.
US, Nov 03 : Gold prices edged higher in early Asian trading on Tuesday, extending gains after rising more than 2 per cent in the previous session. The decline in oil prices eased concerns over inflationary pressures, while investors remained cautious ahead of the US midterm elections.
Market Performance
Spot gold climbed 0.3 per cent to USD 3,960.80 per ounce by 0032 GMT, building on its recovery from a one year low recorded on Friday. US gold futures for December delivery remained largely unchanged at USD 3,970.80.
Oil prices dropped more than 7 per cent on Monday after Tehran indicated that diplomatic contacts with Washington aimed at ending their eight-month conflict were continuing. Discussions involving Iranian officials and Qatari mediators concluded without a breakthrough, although revised proposals were exchanged.
Meanwhile, US manufacturing activity strengthened in October, supported by robust domestic demand. However, persistent inflationary pressures at the factory level continued to raise concerns about the future direction of monetary policy.
Interest Rate Outlook
Financial markets are closely monitoring the US midterm elections for indications of potential changes in fiscal policy and their implications for investor confidence.
According to CME’s FedWatch tool, traders are currently pricing in a 73 per cent probability of a Federal Reserve rate increase in December. Higher interest rates generally weigh on gold by increasing the opportunity cost of holding the non-yielding precious metal.
In the United Kingdom, the Bank of England is widely expected to increase its benchmark interest rate on Thursday to address inflationary pressures stemming from elevated energy costs. Economists surveyed by Reuters anticipate a 25-basis-point increase, taking the bank rate to 4 per cent from 3.75 per cent.
The Bank of Japan said on Monday that the country had made gradual progress towards stabilising inflation around its 2 per cent target, strengthening expectations of further monetary policy tightening.
Separately, Slovak central bank chief Peter Kazimir said the European Central Bank might need to increase interest rates again to prevent elevated inflation from becoming entrenched. He also cautioned that financial markets could be underestimating the measures required to contain price pressures.
Other Precious Metals
Among other precious metals, spot silver advanced 0.3 per cent to USD 50.79 per ounce, while platinum gained 0.2 per cent to USD 1,451.48. Palladium also rose 0.2 per cent to USD 970.50.
Upcoming Economic Data
Investors are also awaiting the release of US factory orders data for September, scheduled for 1500 GMT on Tuesday.
