Gold's Four-Session Slide Puts the Fed Back in the Driver's Seat

Gold is heading for a fourth straight decline, with the metal's familiar geopolitical hedge appeal proving no match for the inflation arithmetic that expensive crude sets in motion. Worries over sustained inflation are hardening expectations that US rates stay restrictive for longer — and that policy channel is currently drowning out the buying signals coming from funds and central banks.

Why costlier oil weighs on bullion

The trigger for the latest leg higher in crude, according to Reuters, is supply anxiety centered on the Middle East: risks to shipping through the Red Sea and threats to Saudi oil infrastructure. For the gold market, the point is not the geopolitical uncertainty itself but what it might do to inflation and, by extension, monetary policy. Higher energy prices feed inflation fears and, in the market's reading, argue against any near-term policy relief for the non-yielding metal.

The pressure began building earlier in the week. On Monday, a firm dollar and rising US Treasury yields pushed gold lower, Reuters reported. Yesterday the spot price settled at USD 4,122.23 per fine ounce, a level that captures the persistent selling pressure.

The World Gold Council painted a mixed picture on Monday. Stronger inflation and a firmer dollar are a drag on gold, while falling US yields could offer support should equity-market risk increase at the same time. Geopolitical tension, in other words, does not cut cleanly in the metal's favor.

The oil-inflation channel, in the EIA's own numbers

This is not the first time energy has transmitted Middle East risk into the gold price. The US Energy Information Administration flagged the consequences of attacks on oil facilities and tankers in the region as early as October 6. Brent spot averaged USD 114 per barrel in September, the agency noted.

That history matters for how investors should read the current move. What counts is not simply whether geopolitical risks are escalating, but whether they add to energy-price momentum. The latest drag on gold, per Reuters, flows precisely from this link between oil, inflation and monetary policy.

Buyers are still showing up

Against that rate-driven headwind stands a set of concrete purchases. Physically backed global gold ETFs took in USD 10 billion in September, according to the World Gold Council, with holdings rising by 67 tonnes to 4,256 tonnes. Inflows reached a seven-month high in September and stayed positive through mid-October. Digital gold purchases climbed 5% month-on-month in September to 1.7 tonnes.

Official-sector demand has been just as conspicuous. The People's Bank of China reported a 23-tonne gold purchase for September — the largest monthly addition since October 2023, according to the World Gold Council. Those flows reveal a different side of the market than short-term rate expectations do: they are actual demand, whereas policy bets can shift with every new growth or inflation reading.

The picture is not uniformly bright, however. Indian investment funds temporarily suspended new and additional subscriptions to gold feeder funds; existing savings plans and redemptions were unaffected, according to the industry association. China's wholesale demand, meanwhile, stayed well below both the prior-year level and its long-run average.

India: imports down, seasonal buying up

India's September gold imports were worth USD 1.8 billion, or an estimated 20 tonnes, the World Gold Council reported yesterday. It attributed the decline to larger domestic supply, including recycled scrap gold. Seasonal demand, by contrast, picked up — a combination of imports, domestic supply and seasonal buying that makes the country's demand trend hard to read at a glance.

The calendar ahead

The near-term test is monetary policy. Market participants yesterday priced a 16% probability of a rate hike at the October meeting, Reuters reported, while the odds for December held at 90%. A lower probability for the immediate meeting is therefore no all-clear for gold: the market still expects tightening later on. Central-bank purchases and Indian demand provide support, but relief for the metal in the short run depends heavily on whether the inflation and rate pressure Reuters describes begins to ease.

The next signals come from the Federal Reserve's meeting on October 27–28, 2026, followed by US PCE data the week after. In early November 2026, the World Gold Council is due to publish its next gold demand report. While the US dates shape the policy backdrop, the demand report should shed sharper light on the divergences between buyer groups.