Oil Prices Weigh on Gold

Gold prices edged lower on Wednesday as investors assessed the inflationary implications of rising energy costs ahead of the Federal Reserve’s policy announcement.

Spot gold declined 0.1% to $4,055.59 per ounce by 0854 GMT, following a gain of approximately 1% in the previous session. US gold futures for December delivery also fell 0.1% to $4,070.20.

Oil prices rose by more than $2 following an attack on a refinery in Saudi Arabia, reviving concerns about potential supply disruptions. Higher energy prices can intensify inflationary pressures and complicate the outlook for monetary policy.

According to Hamad Hussain, a climate and commodities economist at Capital Economics, the possibility that higher oil prices could prompt a more hawkish Federal Reserve stance appeared to be weighing on gold.

Because gold does not generate interest income, elevated interest rates increase the opportunity cost of holding the metal relative to yield-bearing assets.

Federal Reserve Decision and Inflation Data in Focus

The Federal Reserve was widely expected to leave its benchmark interest rate unchanged at its Wednesday decision, scheduled for 1800 GMT. However, market expectations for subsequent policy moves remain important for gold’s near-term direction.

Traders were pricing in an 84% probability of a rate increase in December, according to CME’s FedWatch Tool.

Investors were also preparing for US Personal Consumption Expenditures inflation data due Thursday. The PCE measure is closely monitored by the Federal Reserve as part of its effort to return inflation to its 2% target.

Softer-than-expected inflation data, combined with a less hawkish-than-anticipated Fed message, could support bullion prices. Conversely, persistent inflation and expectations of higher interest rates could continue to constrain demand.

Analysts Lower Gold Forecasts for 2026

Analysts reduced their gold price forecasts for 2026 for a second consecutive quarter, according to a Reuters survey.

The revisions reflect pressure from elevated US Treasury yields, a stronger dollar and expectations that interest rates will remain higher for longer. These factors can make gold less attractive relative to dollar-denominated and interest-bearing assets.

Despite the downward revisions, analysts continued to anticipate a recovery in gold prices in 2027.

Forecasts for other precious metals also weakened. Analysts and traders lowered their 2026 price expectations for platinum and palladium for a third consecutive quarter, according to the survey.

Other Precious Metals Trade Mixed

Trading across the broader precious metals market was mixed on Wednesday.

Spot silver declined 0.6% to $54.04 per ounce, while platinum fell 0.1% to $1,538.50. Palladium moved in the opposite direction, edging up 0.2% to $1,027.80 per ounce.

The differing price movements reflected a market environment in which investors were weighing inflation risks, interest rate expectations and the outlook for individual metals.

What Investors Should Watch Next

The Federal Reserve’s policy statement and Thursday’s PCE inflation data are the immediate catalysts for gold prices. Any change in expectations for December interest rates could influence Treasury yields, the dollar and demand for non-yielding assets.

Developments in oil supply will also remain relevant. Sustained energy price increases could reinforce inflation concerns and limit the scope for monetary easing, while softer inflation data and less hawkish policy signals could provide support for bullion.