Gold recorded a modest decline on Monday, 12 October, despite a retreat in oil prices and growing expectations that the US Federal Reserve may hold off on further interest rate increases before the end of the year.

During morning trading, the precious metal was down 0.23%, to US$4,184.14 per ounce, after having accumulated a gain of 1.3% in the previous week.

Since the outbreak of conflict in the Middle East, gold has lost approximately 20% of its value, against a backdrop of rising oil and natural gas prices that have intensified inflationary pressures and fuelled expectations of tighter monetary policy.

Despite the decline, some analysts believe the metal could recover a portion of its recent losses, particularly if US Treasury yields and the dollar continue to pull back.

Christopher Wong, strategist at Oversea-Chinese Banking Corp, argues that the fall in long-term US Treasury yields, combined with the modest easing in oil prices, provides grounds for “cautious optimism” regarding gold’s outlook.

“More moderate inflation, especially if accompanied by further declines in long-term bond yields and the US dollar, could lead gold to extend its recovery,” he said, as quoted by Bloomberg.

US Inflation Data and Fed Speeches in Focus

Investors are now awaiting the release of the United States Consumer Price Index (CPI) for September, scheduled for Wednesday, 14 October.

Analysts anticipate that year-on-year inflation will accelerate from 3.4% to 3.7%, a result that could materially influence expectations around the trajectory of US interest rates.

Market attention will also be focused on a speech by Kevin Warsh, the Fed chair, at the International Monetary Fund’s (IMF) annual meeting in Bangkok.

Public remarks are also expected from Christopher Waller, a member of the Federal Reserve Board of Governors, and the president of the Federal Reserve Bank of Cleveland.

The evolution of inflation, bond yields, and the dollar is expected to continue shaping gold’s performance, given that the metal generates no interest-based returns.