Gold falls below $4,100, silver slides 4.5% as Brent nears $112: Will Fed rate hike fears trigger more losses?

Gold and silver prices tumbled on Thursday, October 22, as escalating tensions in the Middle East pushed crude oil prices higher, fuelling inflation concerns and expectations of tighter US monetary policy. The surge in energy prices raised fears that interest rates could remain elevated for longer, weighing on precious metals despite rising geopolitical uncertainty.

In the latest market snapshot at around 21:39, spot gold (XAU/USD) fell 2.27% to $4,047.39 an ounce, while silver dropped 4.51% to $55.105. Gold futures declined 2.11% to $4,062.25, while silver futures fell 4.51% to $55.105.

Meanwhile, Brent crude rose 2.78% to $111.85 a barrel, and US West Texas Intermediate (WTI) crude gained 1.70% to $98.80. Copper futures also declined 2.76% to $6.3980, reflecting broader pressure across parts of the metals market.

On the domestic market, silver futures for December delivery on the Multi Commodity Exchange (MCX) plunged ₹8,593 per kg to ₹2,00,575, their lowest level in seven months. Gold futures fell ₹2,300 per 10 grams to ₹1,43,600, marking a two-month low. Gold and silver have declined 3.3% and 10%, respectively, so far in October.

Why are gold and silver prices falling?

The sell-off comes amid renewed attacks on commercial shipping in the Strait of Hormuz and growing concerns over energy supply disruptions. Reports of damage to oil tankers, threats to shipping and renewed Houthi attacks on Saudi Arabian infrastructure have intensified fears of a wider regional escalation.

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Higher crude oil prices can increase transportation, manufacturing and other business costs, raising the risk of persistent inflation. This complicates the outlook for the US Federal Reserve, which must balance price stability against economic growth.

Gold traditionally benefits from geopolitical uncertainty because investors view it as a safe-haven asset. However, it does not pay interest. When markets anticipate tighter monetary policy, interest-bearing assets can become more attractive relative to bullion, putting downward pressure on gold prices.

Silver has faced a sharper sell-off because both investment demand and industrial activity influence it. Higher borrowing costs and concerns about economic growth can weaken demand expectations for the metal.

Will the US Federal Reserve raise interest rates?

Markets expect the Fed to hold interest rates steady at its October 27–28 meeting, but the possibility of a rate hike in December remains a concern. Recent US consumer and producer inflation readings came in hotter than expected, while rising energy prices could add to inflationary pressures.

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The prospect of higher interest rates for longer has therefore emerged as a key headwind for precious metals. Even if geopolitical risks sustain demand for safe-haven assets, expectations of tighter monetary policy could limit any recovery.

What does the oil price surge mean for markets?

Brent crude's rise towards $112 a barrel highlights the risk that disruptions to Gulf shipping could keep global energy costs elevated. Goldman Sachs has raised its December Brent crude forecast to $90 a barrel from $85, citing a risk premium of just over $20 a barrel, although current prices remain significantly above that forecast.

Higher oil prices could also weigh on equities by raising corporate costs and complicating the inflation outlook. Copper's decline alongside gold and silver points to broader concerns about industrial demand and financing conditions.

What should investors watch next?

Developments around the Strait of Hormuz, crude oil prices and signals from the Fed will be crucial for precious metals in the coming sessions.

For investors, the latest correction highlights the competing forces shaping gold and silver. Geopolitical tensions can support safe-haven demand, but when they also push energy prices higher and strengthen expectations of tighter monetary policy, precious metals can come under significant selling pressure.

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