Gold prices fall as investors assess Fed signals, await US inflation data

Gold prices declined on Thursday as investors weighed the US Federal Reserve's decision to keep interest rates unchanged and assessed signals from Fed Chair Kevin Warsh, while awaiting key US inflation data for clues about the future direction of monetary policy.

Spot gold fell 0.7% to $4,037.98 per ounce by 0410 GMT, while US gold futures for December delivery remained steady at $4,049.80.

"Today's fall is purely because of persistent Middle East uncertainty and markets positioning ahead of today's inflation data," said Ajay Kedia, director at Mumbai-based Kedia Commodities.

Fed decision and inflation data in focus

The Federal Reserve kept its benchmark interest rates unchanged in the 3.75% to 4.00% range on Wednesday, in line with market expectations. Policymakers opted to delay any changes to borrowing costs until after next week's US midterm elections as they await further inflation data.

Market expectations for a December rate hike eased following the announcement. Traders are now pricing in a 78% probability of a rate increase in December, compared with 84% before the Fed's decision, according to the CME FedWatch Tool.

Higher interest rates tend to weigh on gold because bullion does not generate interest income. As borrowing costs rise, the opportunity cost of holding the precious metal increases, potentially making it less attractive to investors.

Markets are now awaiting the US Personal Consumption Expenditures (PCE) data, scheduled for release at 1230 GMT. The measure is closely monitored by the Federal Reserve as part of its efforts to bring inflation down to its 2% target.

Middle East tensions and commodity outlook

Geopolitical uncertainty remained another factor influencing market sentiment. The Wall Street Journal reported on Wednesday that US Vice President JD Vance had sent a letter to Iranian Security Council chief Mohsen Rezaei in an attempt to revive peace negotiations.

Meanwhile, the World Bank said on Wednesday that global commodity prices were projected to rise 23% in 2026. It attributed the expected increase to higher energy prices and disruptions to cargo shipping amid the Middle East war, problems affecting grain shipments in the Black Sea and strong demand for safe-haven assets such as gold.

China's gold imports rise, other precious metals decline

Data from Hong Kong's Census and Statistics Department showed that China's net gold imports through Hong Kong increased by more than 28% in September compared with August, reaching a five-month high.

Other precious metals also traded lower on Thursday. Spot silver declined 1.5% to $53.15 per ounce, while platinum fell 1.5% to $1,515.70. Palladium dropped 0.6% to $1,004.25 per ounce.