Gold Prices Decline in Asian Trade Ahead of Fed Decision

Gold prices declined in Asian trade on Tuesday as investors focused on the upcoming U.S. Federal Reserve (Fed) interest rate decision and signals regarding the course of monetary policy. Spot gold fell 0.3% to $4,126.84 per ounce, while U.S. gold futures for December delivery also lost 0.3% to $4,146.

The markets are focusing on the Fed meeting to be held on October 27-28 and the personal consumption expenditures (PCE) data monitored by the central bank in assessing the inflation outlook. In September, the Fed had raised its policy rate by 25 basis points to a range of 3.75%-4.00%. According to CME FedWatch data, investors price in an 83% probability that the Fed will keep interest rates unchanged at next week's meeting, while expectations for a rate hike in December stand at 94%.

While Bank of Japan Governor Kazuo Ueda stated that core inflation is quite close to the 2% target and indicated room for further rate hikes, persistently high interest rates increase the opportunity cost of holding non-yielding gold, creating pressure on prices. On the other hand, alleged attacks by Iran-backed Houthis in Yemen targeting energy, airport, and military sites in Saudi Arabia keep geopolitical risks on the agenda. Among other precious metals, spot silver fell 0.7% to $56.69 per ounce, platinum remained flat at $1,639.65, and palladium dropped 0.7% to $1,112.08.