Saudi Arabia attacked, pushing oil prices above $110, gold falls below $4,050 entering a "capitulation phase"
Tensions in the Middle East have escalated, sending Brent crude soaring over 4% to break above $113 per barrel. This has reinforced expectations of persistently high inflation, prompting central banks around the world to tighten monetary policy. As interest rates climb, the relative appeal of gold diminishes. On Thursday, gold prices plunged 2.8%, dropping below $4,050 per ounce. Analysts point out that precious metals are experiencing capitulation-style selling, and volatility may continue until after the Federal Reserve meeting.
Rising tensions in the Middle East combined with the upcoming Federal Reserve meeting have pushed gold prices down to their lowest point in over two months.
On Thursday, spot gold prices plummeted 2.8%, falling below the $4,050 per ounce mark.
Meanwhile, Brent crude prices soared over 4% after a fatal attack in Saudi Arabia, breaking above $113 per barrel. The United States has ordered some embassy staff and their families to leave Saudi Arabia, highlighting significantly increased concerns about further escalation in the region.
Elevated energy prices are fueling inflation expectations, with markets watching the Federal Reserve's policy direction at next week’s meeting closely. As a non-interest-bearing asset, gold remains under sustained pressure in a high-rate environment. Alex Carrier, portfolio manager at DNCA Finance, commented:
The precious metals market is currently experiencing a capitulation-style sell-off, with volatility likely to remain high at least until the Federal Reserve meeting next week.
Saudi attack sparks supply fears as oil price surges above $113
As reported by Wallstreetcn, according to CCTV International News, on October 22, Yemeni Houthi spokesperson Yahya Saree released a video statement claiming the Houthis carried out four military operations against Saudi Arabia in the past 48 hours, using multiple ballistic missiles and drones.
The drone attack on Saudi Aramco’s Shaybah oil field killed two people, but did not affect field operations; King Fahd International Airport in Dammam was also attacked with casualties reported. The Houthis also claimed to have attacked Yanbu Port in the last 48 hours.
Meanwhile, the United States has ordered a partial evacuation of embassy staff and families from Saudi Arabia, further indicating that regional security risks have risen sharply and may continue to deteriorate.
Brent crude futures jumped in early Thursday trading, with gains extending to 4%—the largest single-day increase in roughly two weeks. US WTI crude rose 2.3% to $99.37 per barrel.
High oil prices complicate the Fed’s monetary policy path
Surging oil prices are reinforcing expectations of persistently high inflation, prompting central banks worldwide to tighten monetary policy, while higher interest rates directly reduce gold’s relative appeal.
Federal Reserve Chair Kevin Warsh’s statement last Friday failed to dispel the market’s anticipation that rates will remain unchanged next week, with interest rate swaps currently pricing in less than a 10% chance of a 25 basis-point hike. Slumping housing starts and record-low home sales also support a hold decision.
However, continued rises in energy prices could shift this outlook. Current inflation remains well above the Fed’s 2% target, and high energy costs are boosting expectations of another rate hike before year-end—traders now widely expect another hike at the December meeting.
As of Thursday’s US market close, spot gold was priced at $4,028 per ounce, plunging nearly 3% from the previous day. Silver fell even more markedly, down 4.9% to $55.16 per ounce, while platinum and palladium both declined as well. The Bloomberg Dollar Spot Index was little changed.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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