Gold slips as investors weigh Fed rate outlook

Gold prices declined in early Asian trading on Tuesday as investors awaited the US Federal Reserve's upcoming policy decision for clues on interest rates and monetary policy. Spot gold decreased 0.3% to $4,126.84 per ounce, and US gold futures for December delivery slipped 0.3% to $4,146.00. Investors are now focusing on the Fed's policy meeting on October 27-28 and the upcoming US Personal Consumption Expenditures (PCE) data, which serves as a crucial indicator for the central bank aiming for 2% inflation.

In September, the Fed raised its benchmark overnight interest rates by 25 basis points to the 3.75%-4.00% range.

According to CME's FedWatch Tool, traders now believe there is an 83% chance that the central bank will maintain rates steady next week, while the likelihood of a rate hike in December remains at 94%. The Bank of Japan's Governor Kazuo Ueda stated that underlying inflation is "quite close" to the central bank's 2% target, driven by strong global AI demand and a tight labor market, suggesting potential additional rate increases.

Higher interest rates typically have a negative impact on gold prices, as they raise the opportunity cost of holding the metal, which does not yield interest. Geopolitically, Yemen's Houthis claimed responsibility for several attacks on Saudi energy, airport, and military targets on Monday. In other metals, spot silver slipped 0.7% to $56.69 per ounce, platinum remained steady at $1,639.65, and palladium decreased 0.7% to $1,112.08.