Global gold price today, Saturday, October 25, 1405 / weekly drop of gold despite the weakening of the dollar; Oil and inflation changed the market equations

The price of gold recorded a weekly decrease at the end of trading on Friday; Because the increase in the price of crude oil partially neutralized the supporting effect of the weakening of the dollar and the fall in the yield of American bonds. At the same time, the release of US inflation statistics and changing expectations about the next decision of the Federal Reserve put traders in the precious metals market in a cautious position. Global gold price post today, Saturday, October 25, 1405 / weekly drop of gold despite the weakening of the dollar; Oil and inflation equations b

According to Ambassador Arjan, the global gold market was affected by a series of economic and geopolitical factors last week. On the one hand, the increase in American inflation strengthened the possibility of changing the monetary policy of the Federal Reserve and presented the prospect of higher interest rates to investors. On the other hand, the devaluation of the dollar and the fall in the yield of American treasury bonds prevented the intensification of selling pressure in the gold market. In the meantime, the increase in oil prices and concern about the disruption of energy transmission routes increased the complexity of decision-making in the financial markets.

Gold finished the week down

The price of one ounce of cash gold reached 4,165 dollars and 40 cents at the end of trading on Friday with a decrease of 0.1%. On the other hand, gold futures closed with an increase of 0.4% at the level of 4 thousand 186 dollars and 70 cents. Despite the growth of the final day of futures trading, both contracts experienced a 0.7% decrease in price for the week as a whole.

This performance shows that the gold market is still caught between the supporting factors and the pressures caused by inflationary expectations and the American monetary policy. The weakening of the dollar and the decrease in bond yields work in favor of gold, but the increase in energy prices can intensify the concern about the continuation of inflation and the possibility of an increase in interest rates; A factor that puts pressure on the attractiveness of this precious metal.

US inflation put interest rate path in focus

One of the most important factors affecting the gold market last week was the publication of consumer and producer inflation statistics in the United States. According to published data, the total US consumer price index increased by 3.7% in September compared to the same period last year. The annual growth of the core consumer price index also reached 2.6 percent.

The increase in energy prices played an important role in the growth of the total index; So that the energy price index increased by 20.4% compared to September last year. Meanwhile, the US total producer price index rose 6.3 percent in September from a year earlier, the largest annual increase since December 2022.

These figures once again turned traders' attention to the possibility of a change in the direction of the Federal Reserve's monetary policy. The long-term goal of this central bank for inflation is 2%; However, the Federal Reserve also considers the personal consumption expenditure index to evaluate price pressures.

Rising inflation can lead the US central bank to maintain interest rates at high levels or even increase them. Such conditions usually end up at the expense of gold; Because unlike bonds and some financial assets, this metal does not pay periodic interest. As a result, rising returns on interest-bearing assets can increase the opportunity cost of holding gold.

The possibility of interest rate increase decreased

After the release of consumer and producer inflation statistics, the possibility of a 0.25 percentage point interest rate increase in the upcoming meeting of the Federal Free Market Committee increased. However, Federal Reserve Chairman Varsh's comments at the annual meeting of the International Monetary Fund and the World Bank Group in Bangkok moderated some of these expectations.

Pointing out that persistent inflation is still one of the common challenges for policymakers around the world, Varsh emphasized that the global economy has shown more resilience than his previous expectations. He also said that the Federal Reserve has reduced part of its expansionary monetary policy at the September meeting, but did not provide a clear indication of the central bank's next move.

Jose Torres, the chief economist of Interactive Brokers, believes that the balanced tone of the Federal Reserve Chairman, instead of indicating the beginning of an aggressive period of interest rate increases, is a sign of a more cautious and gradual approach. According to him, this position is consistent with the statements of some other officials who have the right to vote.

According to the Fedwatch tool of the Chicago Stock Exchange, the probability of an interest rate increase in the upcoming meeting of the Federal Reserve has decreased to about 17%; While this figure was close to 28% the previous day.

A decrease in the probability of an interest rate increase can support the price of gold. Lower interest rates typically increase the attractiveness of non-yielding assets, including gold. Also, the weakening of the dollar in such a situation can make buying gold cheaper for foreign investors.

The return of demand for US securities

The significant growth of the American bond market on Thursday and the decrease in the yield of treasury bonds also reduced the severity of the fall in gold prices. In a situation where bonds have been less attractive to investors during the recent period, the concern of increasing the amount of corporate debt to finance the development of artificial intelligence infrastructure has once again drawn the attention of a part of investors to the debt of the US government as a safe asset.

The decrease in the yield of treasury bonds is important in terms of the opportunity cost of holding gold. As the returns on alternative assets decrease, the pressure on holding gold without interest will also decrease. However, the continuation of this support will depend on the future path of bond yields and market expectations of US monetary policy.

The increase in oil prices is an obstacle to the growth of gold

On the front of the energy market, the price of oil increased during the last week and became one of the factors limiting the growth of gold. Brent oil futures, the global oil price index, rose 4.8 percent for the week as a whole. At the same time, US West Texas Intermediate crude oil registered a 10.9% increase.

Although it is claimed that overall Middle East crude oil flows have largely returned to near pre-war levels, concerns about security of supply remain high. The increase in Iranian attacks on ships passing through the Strait of Hormuz and the escalation of the conflict between Ansarullah and the Yemeni government, which is supported by Saudi Arabia, have increased concerns about the transfer of oil through the Strait of Bab al-Mandab.

The increase in oil prices affects the gold market in two ways. First, the growth of energy prices can intensify inflationary pressures and increase the possibility of continuation of contractionary monetary policy. Second, rising geopolitical uncertainty is fueling demand for safe-haven assets; A factor that can be in favor of gold under normal conditions. Therefore, the final effect of oil developments on gold depends on the extent of their impact on inflation, interest rates and the demand for safe assets.

Washington-Moscow oil agreement under political pressure

In another development, US President Donald Trump announced a major deal with Russian President Vladimir Putin to supply diesel to help lower rising prices of the fuel. The diesel supply disruption comes after Ukraine announced it would resume attacks on Russian energy infrastructure, despite Trump's efforts to reach an energy truce between the two countries.

This agreement has faced opposition in Washington. On Friday, a group of 18 members of the US House of Representatives, including 17 Democrats and one Republican, presented a plan to block the implementation of the agreement.

The 0.7% drop in gold prices for the week as a whole shows that the decline in the value of the dollar and the yield of treasury bonds alone was not enough to bring the market back on the upward path. The increase in the price of oil, concern about the continuation of inflation and the possibility of changing the monetary policy of the Federal Reserve are still factors that determine the price of this metal. On the other hand, reducing the probability of interest rate increase and strengthening the demand for safe assets can reduce the intensity of selling pressure. Therefore, the next path of gold will depend above all on the balance between US inflation data, energy market developments and the future decisions of the country's central bank.