Gold Holds Near Key Support as Oil Spikes Ahead of the Fed

Gold had a volatile week as rising oil prices and uncertainty around next week’s Federal Reserve meeting kept pressure on the metal. Prices moved within a tight range for most of the week before a jump in energy prices on Wednesday pushed bullion toward the $4,050 area. Through the swings, analysts continued to point to long-term demand, especially from central banks, as a source of support.

The week opened with a brief lift. On Monday, October 19, falling oil prices helped New York gold futures climb 0.5% to $4,203.30 a troy ounce in early European trading. Commonwealth Bank of Australia’s Trent Saunders noted that traders were weighing the prospect of further rate increases after a run of hotter-than-expected U.S. inflation data. CME Group’s FedWatch tool showed only a 15% chance of a hike in October, against nearly 89% for December. The early gains faded as the dollar firmed, yields rose and oil recovered. Front-month gold settled 0.5% lower at $4,139.

Zaye Capital Markets’ Naeem Aslam summed up the dynamic. Lower oil prices could favor gold by easing inflation and expectations for tighter policy. Persistent geopolitical tension and high energy costs could keep rates restrictive for longer, raising the opportunity cost of holding a metal that pays no interest.

Tuesday brought a second straight decline, with gold settling 0.4% lower at $4,122.40. Elevated bond yields, partly driven by a selloff in French government debt following unrest in the country, added to the headwinds. Saxo Bank described gold as confined to a relatively narrow range, with resistance around $4,230. In its view, the metal is caught between macro headwinds and steady demand from investors seeking protection against fiscal and geopolitical risks. Silver moved the other way, gaining 1.3% to $57.71.

The sharpest move came midweek. Deadly attacks in Saudi Arabia sent Brent crude above $110 a barrel and prompted the U.S. to order some embassy personnel to leave the kingdom. Gold fell as much as 2.3% to trade below $4,050, its lowest level in more than two months, as higher energy prices and a broad equity selloff weighed on markets. By late morning in New York on October 22, spot gold was down 1.9% at $4,061.13, and silver was 4.9% lower at $55.16. DNCA Finance’s Alex Carrier expects volatility in precious metals to stay elevated at least until the Fed meets.

Expectations for that meeting remain fairly settled. Fed Chair Kevin Warsh’s remarks last Friday did little to change the view that the central bank will hold rates steady. Weaker housing data reinforced that outlook, with lower housing starts and pending home sales at a record low. Rate swaps price less than a 10% chance of a hike next week. Traders still broadly expect another increase in December, and higher oil could strengthen that case, since inflation remains well above the Fed’s 2% target.

Central bank buying remains the key counterweight. Forex.com’s Fawad Razaqzada noted that the recent downtrend may be losing momentum. He sees central bank gold purchases cushioning downside risk, even if prices temporarily test levels below $4,000. That fits the broader pattern of recent weeks: short-term traders reacting to rates and the dollar, while official institutions and long-term investors continue to add gold during periods of weakness.

In the near term, the Fed’s decision next week and the direction of oil will set the tone for gold. A pullback in energy prices or a clear signal that the Fed will hold could ease the pressure. Over the longer term, the forces supporting gold remain in place: central bank demand, geopolitical uncertainty and concerns about rising government debt.

Sources:

Harrup, Anthony, Giulia Petroni, and Megan Cheah. “Gold Futures Slip As U.S. Dollar Gains, Yields Edge Up.” The Wall Street Journal, 19 October 2026, https://www.wsj.com/finance/commodities-futures/gold-edges-higher-as-traders-weigh-fed-rate-hike-expectations-3517c447?mod=Searchresults&pos=5&page=1

Harrup, Anthony, Giulia Petroni, and Amanda Lee. “Gold Futures Post Back-to-Back Losses.” The Wall Street Journal, 20 October 2026, https://www.wsj.com/finance/commodities-futures/gold-edges-lower-as-higher-yields-weigh-ebc91ac4?mod=Searchresults&pos=3&page=1

Xie, Yihui, and Jack Ryan. “Gold Edges Lower as Traders Weigh Middle East Signals, Fed Rate Path.” Bloomberg, 21 October 2026. Updated 22 October 2026, https://www.bloomberg.com/news/articles/2026-10-21/gold-edges-lower-as-traders-weigh-mideast-signals-fed-rate-path