Gold traded near $4,150 an ounce on Monday as investors weighed the pullback in oil prices and looked ahead to next week’s Federal Reserve meeting. Crude retreated from a five-month high after US President Donald Trump moved to ease sanctions and tariffs on Russia, boosting expectations for greater fuel supply and moderating inflation pressures. Recent US CPI and PPI reports showed inflation running hotter than expected, in part due to higher gasoline costs.
Market participants are now focused on the Fed’s upcoming policy decision and the release of US PCE inflation data, the central bank’s preferred inflation gauge. According to the CME FedWatch Tool, futures currently imply a 15% probability of a rate hike this month, rising to 89% for a move in December.
In the euro area, the European Central Bank is widely expected to deliver at least one additional 25-basis-point increase this year to tackle entrenched price pressures. Although gold is traditionally viewed as an inflation hedge, the prospect of higher interest rates generally weighs on the non-yielding metal by increasing the opportunity cost of holding it.
