Gold costs command close to their weakest level since period on weekday once the USA Federal Reserve System proclaimed a discount in pandemic-era input measures as wide expected.

Spot gold was down 0.9% at $1,770.61 an ounce, slightly erasing its losses after the Fed decision. It earlier hit its lowest level since Oct. 13 at $1,757.63.

The Fed also pointed to a recovery in economic activity and employment in its statement while sticking to its belief that high inflation will prove to be "temporary" and may not require a rapid rate hike.

While rate policy is also much loved on everyone's mind, a very, terribly shut second is that the inflationary pressures we've within the market at once, aforesaid David Meger, director of metals mercantilism at High Ridge Futures.

Very loose US monetary policy has helped propel gold sharply higher since the late 2000s financial crisis, with low-interest rates cutting the opportunity cost of holding non-yielding assets and inflation concerns fuelling demand for hedging.

Gold costs weakened sooner than a key US Fed meeting that might give clues concerning raising interest rates amid rising inflationary pressures.

The Movement of Gold Weakens Due to The Tapering of The Fed

Expect the Fed to announce the beginning of tapering however do not see them giving a particular time round the rate hike which could lead on to disappointment as market participants expect one thing additional specific.

Stimulus cuts and rate hikes tend to push bond certificate yields up, increasing the chance price of non-yielding gold. The Fed is anticipated to approve a concept to cut back its bond-buying program on Wed once it concludes its two-day policy meeting.

Markets will also keep an eye on the Bank of England's policy meeting on Thursday as investors weigh the possibility of the first-rate hike by a major central bank since the pandemic.

Gold prices (XAU/USD) remain pressured at around $1,781 after their first negative weekly close in three days. The yellow metal prints a 0.10% intraday loss in early Asia on Monday.

Renewed concerns over inflation and recent Fed cuts are propping up the US dollar and negatively impacting gold prices. Friday's Core PCE Inflation data, remains firmer at around 3.6%, versus the market's 3.7% forecast, fuelling traders' concerns over US inflation.

Rising price pressures can also be felt in the latest speech from Fed Chair Jerome Powell, on October 22, where he cast aside 'temporary' concerns over inflation.

Other Factors of The Weakening of Gold Prices

The US-China dispute is also gaining momentum as the US joins hands with the European Union (EU) over steel and aluminium tariffs to challenge Beijing's steel industry, which in turn supports the safe-haven demand for the US dollar and weighs on gold prices.

The most recent showing of China's woes is the official PMI data for October. As per the release, headline NBS Manufacturing unexpectedly fell to 49.2 in October from 49.6 ordered in September, versus 49.7 forecasts.

Further, the Non-Manufacturing PMI fell to 52.4 within the reportable month from September's reading of 53.2 and contradicted expectations of 52.9.

However, it should be noted that the World Gold Council (WGC) report cited increased demand for gold from India and hopes of more intake joining progress in US stimulus talks to contain gold's recent weakness.

Market sentiment remains mixed as equities hit record highs and the yield curve flattens to fuel hopes of monetary policy tightening. At the latest, S&P 500 Futures are up 0.30% while Wall Street's benchmarks remain positive on Friday.

Looking ahead, the release of the US ISM Manufacturing PMI data for October, expected 60.4 versus 61.1, will be eyed after the recent strengthening of the activity data and amid the Fed cuts chatter. Also important are headlines covering China, US stimulus, and inflation.