Global gold prices dropped to their lowest level in over two months—hovering around US$4,025 per ounce—during early Asian trading on Friday. This decline followed a surge in oil prices, driven by tensions in the Middle East, which heightened concerns regarding inflation and the outlook for U.S. interest rates.
The precious metal faced continued selling pressure ahead of next week’s U.S. Federal Reserve (Fed) monetary policy meeting, as investors assessed how rising energy costs might influence the central bank’s policy direction.
Middle East Tensions Drive Up Oil Prices
Crude oil prices spiked after an attack in Saudi Arabia sparked concerns regarding global energy supplies.
This development raises the risk of an inflationary shock, as higher energy costs could drive up the prices of goods and services.
Yemen’s Houthi group claimed responsibility for an attack on an airport in eastern Saudi Arabia on Wednesday.
According to a BBC report, a drone was intercepted while attempting to target a Saudi Aramco oil processing facility at the Shaybah oil field, while a contractor’s vehicle was reported to have caught fire.
The rise in oil prices has also fueled concerns that the Fed may need to keep interest rates high for a longer period to contain inflationary pressures.
This environment poses a challenge for gold—which does not yield interest—making fixed-income assets more attractive as interest rates rise.
Fed Interest Rate Expectations Limit Gold’s Movement
According to the CME FedWatch tool, the market assigns a 92.8% probability that the Fed will maintain current interest rates at its October meeting.
Nevertheless, some traders still see the possibility of an interest rate hike in December should inflationary pressures continue to mount. Fed official Kevin Warsh previously refrained from providing clear indications regarding the outcomes of the October and December meetings.
He also emphasized that economic data—specifically concerning inflation and the labor market—will remain the primary factors in determining the direction of monetary policy.
This uncertainty has led investors to exercise greater caution regarding gold, as the prospect of higher interest rates increases the opportunity cost of holding the precious metal compared to assets that generate returns.
US$4,065 Level Emerges as Key Support
From a technical perspective, the price of gold continues to show a bearish bias, having moved below the 100-day simple moving average (SMA) near US$4,230.
The Relative Strength Index (RSI) at 35 indicates that selling momentum remains significant, even as the price approaches the oversold zone.
The US$4,065 level serves as the immediate support for traders to monitor. Should the price break below this level, gold could potentially extend its decline toward the US$3,960–US$3,940 zone, with further support located near US$3,830.
Conversely, any attempted recovery would need to clear resistance near US$4,150 before testing the US$4,200–US$4,225 zone.
As long as the price remains below these key resistance areas, selling pressure is likely to continue limiting any recovery in gold in the short term.
