Gold prices moved below $4,000 an ounce on Friday as persistent US inflation, elevated energy costs and expectations of additional Federal Reserve interest rate increases continued to weigh on precious metals.
The decline left bullion heading for a second consecutive monthly loss, with investors also responding to renewed volatility in technology stocks and concerns over the financial sustainability of artificial intelligence infrastructure spending.
Spot gold declined 0.7% to $3,992.46 an ounce at 23:50 ET (03:50 GMT), while US gold futures fell 0.8% to $4,002.22.
Silver dropped 1.7% to $51.29 an ounce, and platinum lost 1.8% to $1,460.79.
Spot palladium declined 1.7% to $989.46, while palladium futures weakened 2% to $984.75.
The US Dollar Index slipped 0.3% to 101.79, but the currency’s decline failed to provide meaningful support for gold as monetary policy concerns dominated trading.
Gold Faces Monthly Losses as Middle East Conflict Supports Energy Prices
Gold was on track to lose more than 3% in October, extending a period of weakness despite continuing geopolitical uncertainty.
Renewed fighting in the Middle East has supported energy prices and increased concerns that inflation could remain elevated.
Oil prices rose amid indications that the United States could resume military strikes against Iran following the midterm elections scheduled for the following week.
The prospect of further military action has raised questions about potential disruptions to energy supplies and the implications for global inflation.
Higher oil prices can contribute to broader increases in consumer and business costs, potentially complicating efforts by central banks to bring inflation under control.
Although geopolitical instability often supports demand for gold, the possibility that persistent inflation could lead to higher interest rates has limited the metal’s appeal.
Investors have consequently placed greater emphasis on monetary policy expectations than on gold’s traditional role as a defensive asset.
US PCE Inflation Data Adds to Pressure on Precious Metals
The latest US inflation figures provided further evidence that price pressures remain a concern for Federal Reserve policymakers.
The personal consumption expenditures price index increased 0.5% in September, its largest monthly rise since March.
The PCE index is closely monitored by the Federal Reserve when assessing inflation trends and determining the appropriate level of interest rates.
The stronger reading reinforced market expectations that the central bank could implement another rate increase before the end of 2026.
At its latest meeting, the Federal Reserve maintained interest rates at their existing level.
However, Chair Kevin Warsh did not rule out additional tightening, leaving investors uncertain about the timing and extent of future policy adjustments.
For gold, the prospect of higher interest rates represents an important challenge.
Unlike government bonds or other interest-bearing assets, bullion does not provide regular income.
As borrowing costs rise, the opportunity cost of holding gold generally increases, potentially reducing investor demand.
The resulting pressure has outweighed some of the support normally associated with a weaker US dollar.
Equity Market Volatility Creates Additional Selling Pressure
Developments in global stock markets have also influenced gold trading.
According to ANZ, the metal remains vulnerable to broader asset sales as investors reassess the financial returns expected from substantial artificial intelligence investment programmes.
Technology stocks declined for a second consecutive session following disappointing earnings announcements from major companies.
Alphabet was among the businesses experiencing sharp share price losses as investors questioned the potential profitability of continued large-scale spending on AI infrastructure.
The previous week’s technology-driven selloff had pushed gold to its lowest price since July.
Some market participants reduced their gold holdings to raise cash and offset losses elsewhere in their investment portfolios.
Such activity can create short-term selling pressure even when broader market uncertainty would ordinarily support demand for defensive assets.
Following the earlier decline, gold prices have traded around the $4,000 threshold, with buying interest emerging during periods of weakness.
Physical Gold Demand Helps Stabilise Prices
Chinese households and long-term investors have provided an important source of demand as gold prices have retreated.
Purchases during market declines have helped establish periods of support around $4,000 an ounce.
This buying interest has partly offset selling pressure from investors responding to equity market volatility and changing interest rate expectations.
However, the outlook remains uncertain as markets assess the potential for further monetary tightening in the United States.
Developments in the Middle East could also influence gold through their effects on oil prices, inflation expectations and investor sentiment.
Movements in Treasury yields and the US dollar will remain important indicators for bullion traders.
Whether gold can sustain support near $4,000 may depend on the strength of physical demand relative to the pressure created by expectations of higher interest rates.
Copper Weakens as Investors Reassess AI Infrastructure Demand
The decline in technology shares has also affected industrial metals, with copper facing renewed pressure.
ANZ reported that the selloff in technology stocks had increased risk aversion across commodity markets, weighing on base metal prices.
Copper had previously benefited from expectations that expanding investment in artificial intelligence infrastructure would increase demand for electrical equipment and data centre construction.
The metal is widely used in power distribution systems, making it an important component of the infrastructure required to support energy-intensive computing facilities.
However, growing concerns about the cost and profitability of AI projects have prompted investors to reassess the pace of future infrastructure development.
This shift in sentiment has contributed to weaker copper prices despite continued physical demand.
Chinese buyers have remained active in securing supplies as market availability tightens.
The Yangshan copper premium rose to a record $200 per tonne, reflecting strong demand for imported copper in China.
The increase indicates that underlying physical market conditions remain supportive even as financial investors respond to uncertainty surrounding technology investment.
The contrasting signals highlight the difference between near-term market sentiment and demand from industrial consumers.
For precious and industrial metals alike, investors will be monitoring inflation data, interest rate expectations and developments in the technology sector.
Gold’s movement below $4,000 underscores the influence of monetary policy concerns, while copper’s performance illustrates how uncertainty over artificial intelligence investment is affecting a broader range of commodity markets.
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