Gold hovers near $4,000 as PCE inflation, oil risks revive Fed hike concerns

Gold prices hovered near $4,000 in October as rising inflation concerns and potential Federal Reserve rate hikes weighed on the precious metal. Inflation fears were heightened by a 0.5% increase in the personal consumption expenditures price index in September, the highest monthly rise since March. This inflation surge, along with geopolitical tensions and the prospect of military strikes against Iran, prompted concerns that the Fed might raise interest rates before the year's end.

The Fed's decision to keep rates unchanged this week did little to alleviate the situation, as Chair Kevin Warsh hinted at the possibility of additional tightening measures. Higher borrowing costs typically undermine gold's appeal, making the non-yielding metal less attractive compared to interest-bearing assets. Moreover, the technology sector's poor performance, driven by disappointing corporate earnings and a decline in AI-related investments, further pressured gold prices.

This tech-driven drop had previously pushed gold to its lowest level since July, with significant selling seen in bullion as investors liquidated positions in search of better returns elsewhere. However, gold has since stabilized around $4,000, finding support from Chinese households and other long-term investors who continue to buy during market dips.

The technology sector's selloff has also raised risk aversion across commodity markets, intensifying the downward pressure on copper. Despite this, robust demand from Chinese buyers has helped maintain copper prices, with the Yangshan copper premium reaching a record high of $200 per tonne.