Gold faces steepest weekly drop in four months ahead of Fed meeting

Gold prices retreated on Friday and are poised to record their sharpest weekly loss in more than four months. The precious metal slid 0.1 percent to $4,018.69 per ounce in spot trading by 00:36 GMT, hitting its lowest point since August 3. Since the start of the week, gold has dropped 3.4 percent, marking the largest weekly decline since June.

Fed rate expectations weigh on bullion

The downturn coincided with rising oil prices and robust US economic indicators that strengthened forecasts for the Federal Reserve to keep interest rates elevated for an extended period. Higher energy costs reinforce the view that the central bank will maintain tight monetary policy, increasing the opportunity cost of holding non-yielding assets like gold. Meanwhile, US December futures for gold slipped 0.6 percent to $4,033.70.

Oil prices surged nearly four percent on Thursday to a five-month high after Houthi attacks on Saudi Arabia raised concerns about potential disruptions to energy supplies. This spike in crude further supports the narrative of sustained high rates, pressuring gold’s appeal as a safe haven against yield-bearing alternatives.

Labor market resilience impacts outlook

Recent data showed a decline in new US unemployment insurance claims to levels not seen in approximately 57 years last week. This figure reflects a modest recovery in job growth during October, adding weight to arguments for maintaining restrictive monetary conditions. Investors are now focused on the Federal Reserve’s upcoming policy meeting scheduled for October 27 and 28, along with personal consumption expenditure data due next week.

Market participants currently assign less than seven percent probability to a rate hike at next week’s meeting. However, expectations for a December increase remain firm at 81 percent, indicating a consensus that rates will stay higher for longer.

Silver and platinum follow downward trend

Other precious metals also faced selling pressure. Silver fell 0.1 percent to $54.46 per ounce in spot transactions, while platinum declined 0.4 percent to $1,563.67. Palladium dropped 0.5 percent to $1,051.00. All three metals are tracking toward weekly losses, mirroring the broader weakness in the precious metals complex driven by macroeconomic headwinds.