Gold rises on softer oil; Markets parse Fed signals

Gold prices experienced a rebound on Monday following a drop in the previous session, as lower oil prices helped alleviate inflation concerns. Investors were also analyzing comments from the Federal Reserve to gain insights into the trajectory of US interest rates. Spot gold increased by 0.7% to $3,900.90 per ounce by 0440 GMT, after hitting a one-year low the day before. December gold futures saw a 0.3% rise to $3,909.70.

Conversely, bullion plummeted by 3.5% to its lowest level since October 2025 on Friday, sinking below the $4,000 per ounce threshold due to a sell-off in technology stocks. This led to the forced disposal of safe-haven assets, including gold, and margin calls.

Kyle Rodda explained that the market was experiencing a bounce after the initial sell-off, and the decline in oil prices had provided some relief for precious metals. Oil prices declined by over 3% following reports of ongoing Iranian negotiations in Doha for a third consecutive day with Qatari mediators. The discussions aimed to reach a deal to end the US-Israeli war on Iran.

Elevated energy prices often increase the likelihood of the Federal Reserve maintaining higher interest rates for an extended period, which in turn raises the opportunity cost of holding non-yielding bullion. Meanwhile, three Fed officials argued for additional interest rate increases during a Friday press conference to tackle high inflation levels. This was the first round of commentary from central bankers following last week's monetary policy meeting where short-term borrowing costs remained unchanged.

Traders now estimate a 73% probability of a rate hike in December, according to the CME's FedWatch Tool. Ole Hansen, head of commodity strategy at Saxo Bank, noted that gold faces a challenging near-term environment where technical selling and liquidity concerns outweigh its long-term investment potential. Spot silver rose by 1.8% to $49.97, platinum increased by 0.1% to $1,432.63, and palladium remained steady at $976.31.