Oil’s Return to $110 Boosts Fed Hike Expectations, Pressuring Gold for Fourth Day Toward $4,100

TradingKey - On October 21, gold prices continued their adjustment, with gold (XAUUSD) dropping intraday to as low as $4,106, nearing the $4,100 mark and marking its fourth consecutive trading day of decline. With international oil prices remaining high recently, the market is reassessing the impact of energy prices on US inflation and the Federal Reserve's subsequent interest rate policy.

As of press time, gold fell about 0.3% to trade near $4,114, hitting an intraday low of $4,106.01. So far this week, the cumulative decline in gold prices has exceeded 1%.

From a fundamental perspective, energy prices have become a key factor influencing the current trend of gold. During Wednesday's session, Brent (UKOIL) crude oil rose back above $110, while WTI (USOIL) crude oil also approached $100. Sustained high oil prices have heightened market concerns over sticky inflation, prompting investors to continue evaluating the possibility of the Fed maintaining higher interest rates.

Regarding interest rate expectations, the Federal Reserve will hold its monetary policy meeting from October 27 to 28. According to the CME FedWatch tool, the market currently estimates the probability of another rate hike in October at only around 15%, but pricing for a December rate hike remains near 90%. Higher interest rates typically increase the opportunity cost of holding non-yielding gold, which is an important background factor for the recent pressure on gold prices. Meanwhile, the US Dollar Index has stabilized near 101.8, also limiting room for a short-term rebound in gold.

Gold Price Daily Chart, Source: TradingView

Currently, key downside support for gold is at the $4,100 mark. If this level is lost, adjustment pressure on gold prices could expand further, potentially leading to a test of support near $4,066. If gold can hold $4,100 and reclaim the $4,160–$4,180 range, the short-term decline is expected to ease, setting up another challenge of resistance at $4,200–$4,230. Next, the market will focus heavily on the Fed's interest rate decision and US PCE inflation data.