Gold slips as investors weigh Fed rate outlook

Gold prices experienced a decline in early Asian trading on Tuesday as investors anticipated the upcoming US Federal Reserve policy decision. Spot gold decreased by 0.3% to $4,126.84 per ounce, while US gold futures for December delivery fell 0.3% to $4,146.00. Traders are now focusing on the Fed's October 27-28 policy meeting and the upcoming US Personal Consumption Expenditures (PCE) data, which are crucial indicators for the central bank's inflation target of 2%.

The US Federal Reserve raised its benchmark interest rate by 25 basis points to the 3.75%-4.00% range in September. According to CME's FedWatch Tool, there is an 83% probability that the central bank will maintain rates steady next week, with a 94% chance of a rate hike in December. Bank of Japan Governor Kazuo Ueda mentioned that underlying inflation is near the 2% target, with strong global AI demand contributing to inflationary pressure due to a tight job market, indicating potential for additional rate increases.

Higher interest rates usually negatively impact gold prices as they raise the opportunity cost of holding bullion, which does not generate interest. Geopolitical events also played a role, with Yemen's Iran-aligned Houthis claiming responsibility for attacks on Saudi energy, airport, and military targets. Silver prices dropped 0.7% to $56.69 per ounce, platinum remained steady at $1,639.65, and palladium declined 0.7% to $1,112.08.