Gold started the week lower as caution dominated investor sentiment ahead of the upcoming talks between the United States and China, while developments in the Middle East continued to influence asset pricing. Spot gold fell 0.7% to $4,348 per ounce, while gold futures declined 0.9% to $4,347 after the metal recorded a modest weekly gain of around 0.6%.
The current market picture reflects two opposing forces. On one side, lower U.S. Treasury yields are providing some support for gold. On the other, the dollar continues to hold a large part of its recent gains after rising more than 1% during the week, limiting the ability of the precious metal to quickly regain upward momentum.
The Federal Reserve decision to raise interest rates by 25 basis points for the first time in three years has brought monetary policy back to the center of market attention. The central bank maintained a hawkish tone while continuing to focus on bringing inflation back toward its 2% target, leaving the door open for additional rate increases if inflationary pressures remain elevated.
Despite this, the bond market reacted somewhat differently, with Treasury yields falling as investors gained greater clarity over the expected direction of monetary policy in the coming months. This divergence between a stronger dollar and lower yields helps explain part of the hesitant movement in gold. Pressure also extended to other precious metals, with silver falling to around $65 and platinum declining to $1,796.
One of the most important events for markets this week will be the expected meeting between Donald Trump and Xi Jinping in Washington. Trade tariffs and artificial intelligence are expected to dominate the discussions, particularly as trade disagreements remain unresolved and the current tariff truce approaches its expiration in November. Any signs of progress between the two sides could improve risk appetite and reduce demand for safe haven assets, while renewed trade tensions could bring concerns over growth and inflation back into focus.
At the same time, developments in the Middle East continue to move between military escalation and attempts to reopen political channels. New attacks carried out by the Houthis against Saudi Arabia revived concerns over the security of energy infrastructure and supply routes. However, comments from Trump indicating that he could be open to meeting the Iranian president during the United Nations General Assembly gave markets some hope that a diplomatic path could emerge. These signals were enough to put additional pressure on oil prices.
The current movement in oil prices reflects a partial decline in the geopolitical risk premium rather than a clear improvement in the supply outlook. Markets have started to price in the possibility of diplomatic progress between Washington and Tehran, alongside efforts to restore disrupted Saudi supplies. However, the underlying risks have not disappeared, as missile and drone attacks toward Riyadh continue to highlight the vulnerability of energy infrastructure and major shipping routes.
The continued disruption affecting Saudi Arabia’s East West pipeline also means that any renewed escalation could quickly restore upward pressure on oil prices. As a result, gold and oil remain closely tied to three major themes during the current period: the direction of U.S. interest rates, the outcome of discussions between Washington and Beijing, and whether political efforts in the Middle East can reduce the intensity of the conflict.
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