(Kitco NewsWire) – Spot gold and silver prices were higher in early U.S. trading Monday, as declining crude oil prices eased some inflation concerns and reduced pressure on precious metals ahead of this week's Federal Reserve monetary policy meeting. Spot gold was trading near $4,014.49 an ounce, up 0.50%, while spot silver was trading near $53.990, up 0.20%. Gold recovered above the psychologically important $4,000.00 level after falling to $3,975.00 on Friday, its lowest since July 20, and recording its steepest weekly decline in more than four months.
The latest U.S. economic reports continue to highlight the competing influences of resilient business activity, persistent inflation and weakening interest rate-sensitive demand. Friday's preliminary October composite purchasing managers' index declined to 57.6 from 58.4 in September, although it remained near its strongest level since March 2022. The manufacturing PMI rose to 56.0 from 55.9, while the services index declined to 57.9 from 58.8. Selling-price inflation across the two sectors accelerated to its fastest pace since August 2022, reinforcing concerns that businesses continue to pass higher costs to consumers. The final October University of Michigan consumer sentiment index was revised higher to 48.0 from the preliminary reading of 46.3, but remained below September's 48.1. Year-ahead inflation expectations increased to 4.7% from 4.6%, while longer-term expectations rose to 3.5% from 3.4%, underscoring the persistence of inflation concerns despite weaker household confidence.
Market positioning remains focused on an October Federal Reserve pause followed by a substantial risk of additional tightening before year-end. September consumer inflation rose 0.6% on the month and 3.7% annually, while producer prices increased 1.3% and 6.3%, respectively. Interest rate futures indicate approximately a 90% probability that the Fed will leave its benchmark interest rate unchanged at 3.75% to 4.00% when its Oct. 27-28 meeting concludes Wednesday. However, traders continue to assign roughly an 80% probability to at least one 25-basis-point increase by December, reflecting the combination of resilient economic activity and persistent price pressures. The benchmark 10-year Treasury yield was trading near 4.99% Monday morning, down from its recent high of 5.31%, as concerns about financial-market stability and economic growth supported government bonds. Lower crude prices provided additional relief from inflation concerns, allowing gold to recover some of last week's losses despite the prospect of further monetary tightening.
The Federal Reserve remains in its premeeting communications blackout, leaving incoming economic releases and Wednesday's policy announcement as the principal catalysts for interest rate expectations. Monday's calendar includes the Dallas Fed manufacturing survey at 10:30 a.m. EDT. Tuesday brings September durable goods orders at 8:30 a.m. EDT, followed by consumer confidence, new-home sales and the Richmond Fed manufacturing survey at 10 a.m. EDT. The Federal Open Market Committee's interest rate decision is scheduled for Wednesday at 2 p.m. EDT, followed by Fed Chair Kevin Warsh's news conference at 2:30 p.m. EDT. Thursday brings the advance third-quarter gross domestic product estimate, September personal consumption expenditures inflation figures and weekly jobless claims, all scheduled for 8:30 a.m. EDT. Softer inflation data or less restrictive Fed guidance could reduce December rate hike expectations and support gold through lower Treasury yields and a weaker dollar, while renewed evidence of persistent inflation would reinforce the prospect of further tightening.
The Strait of Hormuz and U.S.-Iran situation remains a significant source of uncertainty in global energy markets, although renewed diplomatic activity helped ease immediate supply concerns Monday. Senior delegations from Saudi Arabia, Pakistan and Turkey were expected in Tehran for talks aimed at preventing another escalation involving Iran, Israel and the United States. Iranian officials have indicated that Tehran remains willing to resume negotiations under a previously established diplomatic framework, including a conditional reopening of the Strait of Hormuz in exchange for an end to the U.S. naval blockade of Iranian ports. However, Washington and Tehran remain divided over the terms of any agreement, and no confirmed breakthrough has emerged. Continuing Houthi attacks against Saudi Arabian infrastructure, threats to commercial shipping and the possibility of renewed military operations leave the region exposed to further disruption. Although regional petroleum exports have recovered substantially through alternative shipping routes and infrastructure, security risks and elevated transportation costs continue to sustain a substantial geopolitical premium in crude oil prices.
Oil prices declined approximately 2% Monday morning as diplomatic efforts reduced some of the immediate concern about another interruption to Gulf energy supplies. Brent crude retreated toward $114.00 a barrel after climbing sharply last week, while WTI remained above $100.00. For gold, the decline in crude prices offers some relief from energy-driven inflation expectations and reduces the immediate pressure for additional Fed tightening. However, the unresolved U.S.-Iran confrontation continues to support defensive demand, leaving bullion caught between geopolitical uncertainty and restrictive monetary policy expectations. Silver is benefiting from the broader improvement in precious metals sentiment, although its industrial exposure leaves it sensitive to concerns about manufacturing activity, high energy costs and slower economic growth.
Global equity markets were mixed to firmer ahead of the U.S. open, with lower crude oil prices providing some relief from inflation and corporate cost concerns. S&P 500 futures gained approximately 0.2%, Dow futures advanced 0.4% and Nasdaq futures edged up 0.1%, as investors prepared for another major week of corporate earnings. European equities were mixed, while Asian markets posted uneven performances amid uncertainty about global interest rates, technology-sector valuations and Middle East developments. Investors are also positioning for quarterly earnings from major U.S. technology companies, including Alphabet, Microsoft and Amazon, with particular attention to artificial intelligence investment spending and its contribution to corporate profitability. The Federal Reserve, European Central Bank and Bank of Japan are all expected to hold interest rates steady this week, although the outlook for additional tightening remains an important influence on global equity and bond markets.
The key outside markets see Nymex WTI crude oil prices lower and trading near $101.00 a barrel, while Brent crude was near $114.00. The yield on the benchmark 10-year U.S. Treasury note is trading near the 4.99% area. The U.S. dollar remains sensitive to changing Fed rate expectations, while the decline in crude oil prices is providing some support for gold by easing near-term inflation concerns. (Kitco Global Index shows how much of today's gold move is the dollar versus the gold market itself.)
Technically, spot gold bulls' next upside price objective is to push prices back above the $4,032.00 to $4,075.00 resistance zone, with a sustained move through the upper boundary needed to improve the near-term technical outlook. Bears' next near-term downside price objective is a break below the $3,963.00 to $3,946.00 support zone, with a deeper downside target at $3,890.00. First resistance is seen at $4,032.00 and then at $4,075.00. First support is seen at $3,963.00 and then at $3,946.00.
Spot silver bulls' next upside price objective is to drive prices back above the $54.530 to $55.770 resistance zone, with a sustained move through the upper boundary needed to improve the near-term technical picture. The next downside price objective for the bears is a break below $53.460, with a deeper downside target at $52.410. First resistance is seen at $54.530 and then at $55.770. Next support is seen at $53.460 and then at $52.410.
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