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Gold prices declined on Wednesday as the U.S. dollar advanced and markets continued to assess the outlook for inflation and Federal Reserve monetary policy.

Spot gold fell 0.9% to $4,318.05 an ounce by 04:53 ET, while gold futures were down 0.5% at $4,354.90 an ounce.

The U.S. Dollar Index gained 0.1% to 100.71, touching its highest level since July 30. A rise in the dollar can increase the cost of gold for buyers holding other currencies.

The moves came as investors considered the possibility that U.S. interest rates could remain elevated as policymakers respond to inflation pressures.

Federal Reserve Outlook Remains in Focus

The Federal Reserve raised its policy rate by 25 basis points last week, bringing the target range to 3.75%-4.00%.

Some Fed officials have subsequently indicated that additional tightening could be required if inflation pressures persist.

Expectations surrounding monetary policy have also supported the dollar.

David Morrison, Senior Market Analyst at Trade Nation, said investors had increasingly turned to the U.S. currency during periods of uncertainty.

“The greenback has become the ‘go to’ haven for investors in times of uncertainty,” Morrison said.

Higher interest rates can affect demand for gold because the precious metal does not provide an interest yield.

Energy Costs Remain an Inflation Factor

Oil prices were below $100 a barrel on Wednesday as markets assessed improving Gulf supplies and diplomatic developments involving the U.S. and Iran.

Crude prices nevertheless remain more than 60% above their levels at the beginning of the year.

Energy prices remain one component of the inflation outlook being monitored by investors as they assess the potential direction of U.S. interest rates.

Chinese Gold Imports Reach 1,000 Tonnes

ANZ analysts said gold has been trading in a relatively narrow range as expectations for further interest-rate increases are weighed against investment demand.

The bank pointed to Chinese demand as one factor supporting the market.

China imported 1,000 tonnes of gold during the first eight months of 2026, according to ANZ.

Chinese gold ETFs added around 44 tonnes in August, while the People’s Bank of China increased its purchases to approximately 20 tonnes during the month.

The figures showed continued purchases from Chinese investors and the country’s central bank during August.

Oil prices remained close to their lowest levels in more than two weeks on Wednesday as traders assessed additional Gulf supplies, U.S. inventories and diplomatic developments involving Iran.

Brent crude futures were up 0.16%, or 16 cents, at $99.41 a barrel at 08:09 GMT. West Texas Intermediate futures declined 0.55%, or 50 cents, to $90.02.

Brent reached $97.36 during the previous session, its lowest price since September 8. WTI fell to its lowest level since September 1 earlier on Wednesday.

The market was also monitoring U.S.-Iran diplomatic contacts after President Donald Trump said his representatives had participated in discussions involving mediators for Iran that he characterised as productive.

East-West Pipeline Returns to Operation

Changes in Middle East crude availability have also contributed to the oil market’s focus on supply.

Saudi Arabia resumed operations on its East-West Pipeline to the Red Sea on Tuesday, according to three sources cited by Reuters.

The pipeline had been closed on September 11 after drone attacks, interrupting crude loadings at the Red Sea port of Yanbu.

The route has been used to redirect approximately 4 million barrels per day of Saudi crude to Yanbu following disruptions to shipments through the Strait of Hormuz. That volume is equivalent to around 4% of global oil supply.

Saudi Arabia has also offered additional barrels to Asian refiners for loading from locations outside the Strait of Hormuz.

Iraq is increasing exports at the same time. Its oil minister said the country was shipping more than 3 million barrels per day and expects exports through Turkey to rise above 600,000 barrels per day.

Hormuz Developments Add to Supply Focus

The market is also assessing the possibility of renewed commercial traffic through the Strait of Hormuz.

A senior Iranian official told Reuters that the Strait could reopen within seven days if the United States eased military pressure and lifted its blockade of Iranian ports.

WisdomTree commodity strategist Nitesh Shah said diplomatic developments were among the factors affecting crude prices.

“Trump is trying to give off strong vibes of good talks … so that’s possibly something driving down oil prices,” Shah said. “But I’d caution that things could change quite abruptly back into positive price moves.”

U.S. Crude Inventories Increase

Industry figures showed U.S. crude inventories increased by 1.8 million barrels in the week ended September 18, contrasting with expectations among analysts surveyed by Reuters for a decline.

Official inventory data from the U.S. Energy Information Administration are due later on Wednesday.

Despite additional crude reaching the market, Kpler head of market engagement Matt Stanley said supply conditions for some refined products remained constrained.

“A bit more crude is finding its way into the market and the East-West pipeline returning is giving everyone some breathing space. But the products problem hasn’t gone away. Diesel is tight. Jet fuel is tight. And increasingly it’s the end user who is going to start feeling this,” Stanley said.

Diesel Export Restrictions Considered

President Trump said on Tuesday that he supported the idea of restricting U.S. diesel exports as a possible measure to address record fuel prices.

Some analysts and market participants cited by Reuters said restrictions may not reduce prices and could contribute to further disruptions in fuel supplies in the U.S. and international markets.

The potential measure comes as diesel and jet fuel availability remains an area of attention despite the improvement in crude oil supply.

European and British wholesale natural gas prices traded near three-week lows on Wednesday following declines earlier in the week, as markets monitored developments surrounding the Strait of Hormuz and European gas storage levels.

The benchmark Dutch front-month TTF contract declined 0.6% to €72.90 per megawatt-hour, remaining around its lowest level since early September.

In the UK, the equivalent NBP wholesale gas contract rose 0.4% to 183.00 pence per therm, while remaining near recent multi-week lows.

Iran Sets Conditions for Reopening Strait of Hormuz

The moves followed comments from Iranian officials indicating that Tehran could reopen the Strait of Hormuz to commercial shipping within seven days.

Iran has said that any reopening would depend on the United States easing military pressure and lifting its blockade of Iranian ports.

The comments come as U.S. and Iranian officials pursue diplomatic contacts in New York during the United Nations General Assembly.

The prospect of increased shipping through the Strait has coincided with declines in both natural gas and crude oil prices from levels reached earlier in September.

EU Gas Storage Around 70% Full

Data from Gas Infrastructure Europe showed underground natural gas storage facilities across the European Union at around 70% of capacity.

Inventories have been rebuilding but remain approximately 12 percentage points below their level a year earlier.

The storage position remains a focus for European energy markets ahead of the winter, particularly in relation to potential changes in demand and supply.

Energy Prices Remain a Factor for Inflation Outlook

Energy prices also remain relevant to the eurozone inflation and monetary policy outlook.

The European Central Bank has highlighted the potential for changes in wholesale energy prices to feed through to consumer inflation.

Further movements in European natural gas prices are therefore likely to remain among the factors monitored by investors assessing the outlook for inflation and interest rates.

Eurozone private sector activity expanded at its fastest pace in 41 months in September, according to preliminary PMI survey data released by S&P Global.

The Flash Eurozone Composite PMI Output Index increased to 53.1 from 52.0 in August, reaching its highest level since April 2023.

The index remained above the 50.0 level separating expansion from contraction for a third consecutive month.

Services and Manufacturing Activity Increase

Growth was recorded across both services and manufacturing during September.

The Services Business Activity Index rose to 53.0 from 51.6 in August, reaching a 10-month high.

The Manufacturing Output Index increased to 53.4 from 53.3, its highest reading in 55 months, while the headline Manufacturing PMI remained unchanged at 52.7.

Germany recorded a third consecutive monthly expansion, with activity increasing at its fastest rate in almost a year.

France returned to growth for the first time in 10 months, while activity also expanded across the rest of the eurozone.

New Orders Record Largest Increase Since May 2022

New business increased for a third consecutive month, with the rate of growth reaching its highest level since May 2022.

Export orders also increased for a second consecutive month following 53 months of declines. The improvement was primarily driven by manufacturing.

Eurozone employment increased modestly for the second consecutive month. Services companies added staff, while manufacturing employment was unchanged.

Germany recorded its fastest rate of job creation since mid-2023, while employment continued to decline in France.

Price Pressures Increase

Input costs and prices charged by eurozone businesses increased at their fastest rates in four months.

The increases were recorded across both manufacturing and services and among the major eurozone economies covered by the survey.

Business confidence regarding activity over the coming 12 months declined to a three-month low.

S&P Global said weaker expectations among French businesses contributed to the decline, while sentiment in Germany was unchanged.

S&P Global Estimates 0.4% Quarterly GDP Growth

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the preliminary PMI readings were consistent with eurozone GDP increasing at a quarterly rate of 0.4%.

He added that “the resilience of economic growth amid the headwinds of geopolitical issues and rising prices will likely embolden the ECB to hike interest rates again before the end of the year.”

The interest-rate assessment represents Williamson’s interpretation of the survey data rather than a confirmed European Central Bank policy decision.

Eurozone government bond yields moved lower on Wednesday as oil and natural gas prices declined amid developments surrounding U.S.-Iran diplomacy.

Germany’s 10-year Bund yield, a benchmark for the euro area, fell to 3.448%, extending its decline from multi-month highs reached earlier in September.

At the shorter end of the yield curve, Germany’s two-year Schatz yield declined to 3.19%, as markets reassessed expectations for further interest-rate increases from the European Central Bank.

European bond yields followed a similar move in U.S. Treasuries, where yields declined across maturities following comments from U.S. President Donald Trump indicating openness to talks with Iranian representatives at the United Nations General Assembly.

Oil and Natural Gas Prices Decline

The move in government bonds coincided with declines in crude oil and European natural gas prices.

A senior Iranian official told Reuters that the Strait of Hormuz could reopen to international maritime traffic within seven days if Washington lifted its naval blockade of Iranian ports and reduced military pressure.

Brent crude subsequently fell below $100 a barrel, while European wholesale natural gas futures also moved lower.

Lower energy prices prompted market participants to reduce some expectations for additional European Central Bank interest-rate increases after the central bank raised rates two weeks earlier.

French Government Bonds Underperform German Bunds

French government bonds underperformed their German counterparts amid continued attention on France’s fiscal position and domestic political situation.

Official projections put France’s debt-to-GDP ratio at 119.3% in 2026, rising to 121.7% in 2027.

France’s 10-year OAT yield has increased by more than 90 basis points during 2026, contributing to a wider spread between French and German government bond yields.

The widening spread indicates that investors are demanding a higher yield to hold French government debt relative to German Bunds.

Eurozone PMI Data in Focus

Market attention is also turning to preliminary Eurozone Purchasing Managers’ Index data for September.

The figures will provide an indication of private sector activity across the currency bloc following recent increases in energy costs and changes in monetary policy.

Investors will also be monitoring the individual readings from major Eurozone economies, including Germany and France.

JPMorgan upgraded BP (LSE:BP.) to Overweight from Neutral and raised its price target to 675 pence from 550 pence as the bank revised its ratings across European oil companies.

The bank also downgraded TotalEnergies (LSE:TTE) to Neutral amid its reassessment of sector valuations and commodity price conditions.

JPMorgan’s Overweight-rated European oil companies now include Shell, BP, Eni and Galp.

“Absolute performance is now +20% USD since the Middle East conflict began and recognition of faltering commodity inventories is rising,” analyst Matthew Lofting said in a note.

JPMorgan Raises BP Price Target to 675 Pence

Lofting said BP’s “recent history has been chequered” by operational and strategic inconsistencies and balance sheet constraints.

The analyst said commodity market conditions and BP’s restructuring programme now present “a major opportunity to lower macro procyclicality and high-grade fundamentals into 2028.”

JPMorgan expects BP’s deleveraging to begin accelerating from the second half of 2026. Under the bank’s base case of Brent crude at no more than $75 a barrel, it expects BP’s gearing metrics to move in line with peers by the end of 2027.

The bank estimates that BP’s restructuring programme represents value equivalent to a high-single-digit percentage compound annual growth rate in underlying earnings per share over three years.

JPMorgan Estimates 11% BP Free Cash Flow Yield for 2027

JPMorgan estimates BP could generate a free cash flow yield of 11% in 2027 based on Brent crude at $75 a barrel.

The bank estimates BP’s oil-price sensitivity at approximately 180 basis points for every $10-per-barrel change in crude prices.

According to JPMorgan, BP also has the highest refining sensitivity among Europe’s large-cap oil companies. The bank noted that refining margins are currently around three times their normal mid-cycle levels.

TotalEnergies Downgraded to Neutral

JPMorgan downgraded TotalEnergies to Neutral, although Lofting said the company’s long-term fundamentals “remain well placed.”

The analyst cited multi-year growth supported by the company’s balance sheet and said he had no specific concerns ahead of TotalEnergies’ upcoming Investor Day.

JPMorgan estimates TotalEnergies’ 2027 free cash flow yield at 9.0%, representing a premium of between 100 and 150 basis points to UK oil majors.

The bank said this suggests TotalEnergies’ “industrial strength is somewhat priced in.”

JPMorgan Cites Three Factors in TotalEnergies Rating Change

Lofting identified three considerations behind the TotalEnergies downgrade.

These included the company’s greater direct exposure to Middle Eastern assets amid disruption risks around the Strait of Hormuz, as well as a moderation in underlying exploration and production volume growth to 3% year over year from 4% during the first half.

JPMorgan also cited potential developments associated with France’s domestic political and budgetary calendar, including the possibility of renewed debate over windfall taxes on the energy sector.

JPMorgan Assesses Impact of Higher Oil Prices

Across the European oil sector, JPMorgan estimated that forward free cash flow yields could reach 20% or more if oil prices of $100 a barrel and historically elevated refining margins were sustained.

The bank also identified the possibility of European windfall taxes as a factor that could affect the sector under such a scenario.