Gold Slips As Traders Assess Geopolitics, Fed Rate Outlook

Gold slipped as traders assessed the prospects of a peace deal between Ukraine and Russia, and the Federal Reserve’s interest-rate outlook following fresh economic data that was delayed due to the US government shutdown.

ABC News reported that Ukraine officials had agreed to a 19-point plan to end the war. The US is holding discussions about a possible peace deal with Russian officials in Abu Dhabi, and Ukraine’s military intelligence chief is also attending meetings there. However, the talks could still fall apart.

In the days since White House Special Envoy Steve Witkoff and Russian counterpart Kirill Dmitriev hammered out a peace proposal, Ukrainian and European officials hurried to draft a counter-offer that would provide far less favorable terms to Russia. The result is a winnowed-down, 19-point plan, according to people familiar with the matter.

Russian officials have called the European plan a non-starter.

Meanwhile, government data showed that US retail sales rose modestly in September while wholesale inflation picked up, reflecting higher energy and food costs. 

Declines in equity markets also weighed on gold as some investors unwound bullion positions to cover losses. 

“A potential peace deal may reduce the geopolitical risk premium and may trigger some profit-taking,” said Ole Hansen, head of commodity strategy at Saxo Bank. Stock-market jitters initially sparked some selling in gold but the negative impact was limited, he added. 

Traders are focusing on the prospects for lower interest rates in the world’s biggest economy as well as signs of stress in the money market. That may underpin gold prices given the potential risk of fresh quantitative easing, Hansen said.

Bullion typically benefits in a monetary-easing environment as it pays no interest.

Gold has consolidated after pulling back last month from a record peak above $4,380 an ounce, with some investors fearing that the rally had gone too far, too fast. Still, the metal has gained about 55% this year and is on track for its best annual performance since 1979, supported by elevated central-bank purchases and inflows to exchange-traded funds.

Gold was 0.2% lower at $4,129.04 an ounce as of 10:15 a.m. in New York. The Bloomberg Dollar Spot Index fell 0.3%. Silver, platinum and palladium all fell.