Gold Lost 3.6% While Oil Hit $112. The Rate Bid Is Beating the Fear Bid.

Spot gold sat at $4,019.90 on Friday morning, down 3.6% on the week and headed for its second straight weekly loss. The same morning, Brent crude touched $112 a barrel, its highest since May. Oil carried a war bid and gold sold off anyway, two moves that rarely arrive in the same week.

The war bid was real enough. It arrived on Wednesday. Houthi drones hit a Saudi airport and Aramco’s Shaybah oil field, and Washington ordered some diplomats to leave Saudi Arabia. The New York Times reports the US and Israel have drawn up plans for renewed strikes on Iran after the midterms, which is what has traders watching the Strait of Hormuz.

None of it saved gold, because the rate bid is heavier. The Fed raised its range to 3.75%–4.00% in September, and CME’s FedWatch showed about an 80% chance of another hike in December on Friday morning, with some desks putting it nearer 90% on Thursday. Goldman Sachs expects that December move to take the peak range to 4.00%–4.25%. The 10-year Treasury sat just under 5% on Friday after peaking above 5.3% earlier in the week, the dollar index held at 101.55, and September’s data gave the hawks their material: consumer prices up 3.7% on the year, producer prices up 6.3%. Gold pays nothing. Silver took the harder hit, sliding to $54.23 on Friday after a 3.5% drop on Thursday.

Managed money cut its COMEX net long from 151,315 to 114,820 contracts in the six weeks to October 6, a 24% cut and the smallest net long since June, with about 90% of it funds closing longs rather than opening shorts. The buying, meanwhile, keeps arriving in vaults: global ETF holdings hit a record 4,256 tonnes in September, the People’s Bank of China added 23 tonnes, its biggest monthly purchase since October 2023 and the 23rd in a row, and GLD, the largest gold ETF, spent the week below its 50-day average after $330.5 million left in the five sessions to October 9. The two-week drawdown stands at about 4.2%, with the metal still roughly 28% below February’s $5,594.80 record.

This week’s selling isn’t a reaction to the Fed. The October 28 decision hasn’t happened yet. It is positioning ahead of it. Funds are placing their bets before the committee speaks at 18:00 GMT on Wednesday, with September’s PCE inflation data landing the next day. What the meeting decides is whether the 80-odd percent December-hike odds priced into the market survive contact with the committee’s language.

Standard Chartered’s Suki Cooper isn’t waiting for the meeting to name the floor. Her desk forecasts a $4,000 quarterly average for the fourth quarter, she said in an interview this week: “We are forecasting a quarterly average of $4,000 per ounce for the fourth quarter.” And she added: “We wouldn’t be surprised if we see prices dipping below $4,000 per ounce,” with $3,900 the next technical support and $3,700 beyond that. The part she kept returning to was the physical market: “I would say that normally in the gold space we look to the physical market to set that downward support, but we haven’t really had a chance to test that floor.” India’s buyers, she noted, stay responsive when prices are high but stable, and step away when they’re high and volatile.

“Our bearish bias below USD 4,150 has kept us on the right side of gold’s weakness,” wrote Florian Grummes, who publishes a daily gold call, on Wednesday. Recent attempts to bounce had failed, he said, putting $4,100 and “more importantly, USD 4,065” under pressure, with $4,035 added as the new target. His bigger-picture read: “gold remains in a sideways consolidation, with bears making slow progress.” In Mumbai, MCX gold futures settled the week at ₹1,43,303 per 10 grams.