Gold fell to a three-month low on Thursday, 22 October, as surging oil prices and escalating Middle East tensions fuelled inflation fears and expectations that US interest rates would remain higher for longer, ahead of next week’s US Federal Reserve meeting.
Source: Pexels.
Andre Cilliers, currency strategist at TreasuryOne, said gold fell 2.7% on Thursday to close at $4,024 an ounce. It briefly dipped to $3,987 in the Far East this morning but has recovered to be currently trading at $4,010.
The shift comes as Brent crude continues to climb, trading above $114 a barrel amid escalating tensions in the Middle East. Houthi rebels have again struck critical Saudi infrastructure in Riyadh, while three vessels hit sea mines in the Strait of Hormuz and Iran claimed responsibility for striking four ships in the Persian Gulf, he noted.
"The risk aversion in markets, along with falling precious metal prices and elevated energy costs are keeping the rand on the back foot for now," Cilliers said.
"The rand is currently quoted at R16.52, and we are likely to see some consolidation around current levels ahead of next week's key central bank interest rate decisions."
Investors favour safe havens
These pressures are also shaping broader financial markets, with concerns over AI spending and the outlook for US interest rates driving investors towards the relative safety of US bonds and supporting the dollar.
Said Cilliers, "Continued concerns over AI expenditure have seen a rotation out of tech stocks back into the safety of US bonds. The Nasdaq closed 2.60% lower last night, while the US 10-year bond yield rallied to its best level in over a month, hitting 4.95%.
"Currency markets are fairly subdued this morning, with the DXY index at 101.65 as the euro trades just above 1.1200 and the pound just below 1.3400. The yen rallied sharply from 158.10 to 156.80 yesterday on rate-hike expectations and safe-haven demand.
"Heightened geopolitical risks, the continued high oil price, and the higher-for-longer Fed rate outlook continue to provide underlying support for the dollar."
