Gold prices rebounded to about $3,965 an ounce on Tuesday, erasing earlier losses and building on Monday’s 2% advance, as investors reacted positively to a renewed decline in oil prices ahead of the US midterm elections. Crude reversed its earlier gains after President Donald Trump said the United States would end its $4 billion aid program to Israel by year-end. At the same time, US Energy Secretary Chris Wright noted that overnight strikes on Iran’s Qeshm Island had not disrupted regional oil supplies.
Softer oil prices could help ease inflationary pressures and temper expectations for additional interest rate increases by major central banks. According to CME’s FedWatch Tool, markets are currently pricing in nearly a 75% probability of a Federal Reserve rate hike in December. Meanwhile, the US midterm elections are underway, with control of both the House of Representatives and the Senate a central focus for investors.
In a separate development, the World Gold Council cut its forecast for gold investment demand this year to 200 metric tons from 400 metric tons, while at the same time raising its projection for central bank gold purchases.
