Gold edged towards $4,200 an ounce on Monday as cheaper oil offered a fresh source of support, even with the Federal Reserve still expected to tighten policy again this year.
Spot bullion gained 0.3% to $4,175.60 by 0259 GMT, while December US futures rose 0.4% to $4,196.40.
The advance followed President Donald Trump’s decision to waive certain sanctions and tariffs targeting Russia, potentially allowing more fuel exports.
Normally, reduced geopolitical tension might dampen demand for gold as a haven, but traders seem more focused on another consequence: lower energy costs could ease inflation and make further US rate increases less urgent.
Why cheaper oil is becoming bullish for gold
Brent fell nearly 1.8% to $107.92 after trading above $110 on Friday, as markets weighed the prospect of additional Russian fuel shipments.
The supply relief remains conditional. Washington is reviewing the economic impact of the measures over 60 days, while attacks on commercial vessels near the Strait of Hormuz continue to threaten global flows.
KCM Trade chief market analyst Tim Waterer linked gold’s modest gain to cheaper energy and argued that a more sustained decline in oil or Treasury yields would offer stronger support.
The transmission mechanism runs through interest rates. Lower fuel costs could temper inflation expectations, reducing pressure for further Fed tightening and the opportunity cost of holding non-yielding bullion.
That benefit may outweigh any reduction in gold’s geopolitical safe-haven appeal, at least while oil continues retreating.
October pause does not remove December Fed risk
The Fed has not abandoned further tightening. Traders assigned only about a 16% probability to an October rate rise on Monday, against roughly 92% for an increase by December.
Chair Kevin Warsh avoided signalling a decision on the October 27–28 meeting last week, allowing investors to price a near-term pause.
Yet September consumer inflation reached 3.7%, while producer prices rose 6.3% from a year earlier.
Commonwealth Bank of Australia analyst Trent Saunders said repeated upside inflation surprises were making investors reassess the prospect of additional Fed increases.
The next personal consumption expenditures inflation report is scheduled for October 29, after the Fed meeting. That means a pause this month would not settle the argument over borrowing costs heading into December.
ETF demand meets the $4,200 resistance test
December futures are within touching distance of $4,200, but spot bullion remains below it. A convincing move through that level would strengthen the rebound, while a failure could refocus attention on support around $4,100.
World Gold Council figures show gold-backed exchange-traded funds attracted $10 billion in September, despite an 8.5% drop in the metal’s price. Their holdings rose 67 tonnes to a record 4,256 tonnes.
Futures traders moved the other way. Net managed-money positioning shrank by about $12 billion as rising yields and a stronger dollar encouraged liquidation.
World Gold Council analyst Johan Palmberg identified that divergence as a defining feature of September’s market.
Those figures describe September, not current positioning. Still, if falling yields encourage futures buying to return alongside ETF demand, gold could have the support needed to challenge $4,200–$4,235.
If crude rebounds and Fed concerns intensify, another failed breakout remains possible.
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