Gold prices remained close to multi-month lows and stabilised to some extent amid a steady dollar and bond yields.
However, the metal continues to face downside risks as ongoing tensions in the Middle East could push oil prices higher after a two-week rebound. Elevated energy prices could fuel inflation concerns and push Treasury yields higher, weighing on gold in the process.
Even after recent softer inflation figures, markets are still pricing a Federal Reserve rate increase before year-end.
Another surge in oil prices, should tensions in the Middle East broaden, could deepen inflation concerns, strengthen the case for tighter monetary policy and lift yields further, driving the precious metal down.
Central bank decisions are also in focus. The European Central Bank is due to announce its policy decision and is expected to leave rates unchanged, while the Federal Reserve and the Bank of England are both scheduled to decide on rates next week. Any new guidance from all three could help shape expectations and influence gold’s near-term direction.
In the long run, ongoing central bank gold buying should continue to act as a steady source of demand, offering support to prices and limiting the scope for further declines.
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