Gold Near $4,000 Threshold as Oil Mounts Federal Reserve (Fed) Pressure

Recording its sharpest drop of the past 4 months with a 4% weekly loss, gold (ounce), amid interest rate concerns reinforced as crude oil climbed above $100, retreated to the $4,000 threshold. Testing its lowest level in the past 3 months on Friday at $3,975 in the spot market, the precious metal had completed the week around $4,010. In the first trades of the new session, gold (ounce) is trading with a daily change of -0.04% at $4,006.30. While the intraday trading range was between 4,003.10 and $4,017.90, the previous close was recorded at $4,007.90.

Can the $4,000 level in gold be maintained?

Standing at the $53.99 level, silver (ounce) is changing hands with a daily gain of +0.08% in an effort to recover from its lowest levels of the past 1 year. While the daily range for silver formed in the band of 53.89 to $54.34, the previous close took place at the $53.95 level. Surpassing $100 per barrel as Middle East tensions caused energy prices to jump, crude oil pushed consumer price inflation (CPI) expectations upward. The stabilization of US 10-year bond yields at the 5% level and the strengthening of the dollar increased the carrying cost of non-yielding gold. Margin calls brought on by sales in technology stocks also prompted investors to close precious metal positions to provide liquidity.

With the policy rate sitting in the range of 3.75 to 4.00%, eyes have turned to the interest rate decision of the Federal Reserve (Fed), which will meet on Wednesday at 14:00 US Eastern Time. Although markets predominantly price in keeping the rate unchanged following the increase in September, hawkish messages regarding December carry the risk of pushing bond yields upward. Meanwhile, the PCE inflation data to be released on Thursday at 08:30 US Eastern Time will determine the direction of short-term pricing. UBS analyst Giovanni Staunovo stated that the $4,000 level could be tested again in the short term, but structural buyers would establish a solid foundation at this level.

How are oil and Fed pressure affecting commodities?

Energy costs above $100 and the strong dollar trend are reflected in Turkey's markets through 2 main transmission channels. While high oil prices create cost pressure on Turkey's energy bill and the current account balance, expectations that global interest rates will remain elevated are priced through exchange rate volatility and capital flows. Domestically, pricing for gram gold maintains its course depending on the balance between global ounce movements and the foreign exchange rate.

This content is for information purposes only and does not constitute investment advice.