Gold Prices Near Three-Month Lows as Markets Await Federal Reserve Decision

Gold prices opened near three-month lows at the start of the week on Monday, October 26, 2026, as investors braced for the United States Federal Reserve's policy decision. December gold futures on the New York Mercantile Exchange opened at $4,012.20 per troy ounce, rising slightly to $4,028.30 per troy ounce during morning trading, which marked a modest 0.1% increase from Friday's closing price. Meanwhile, spot gold rose approximately 0.3% to $4,008.70 per ounce, recovering slightly after hitting its lowest level since mid-July during the previous session.

The downward movement in precious metals comes as the Federal Open Market Committee (FOMC) prepares to conclude its two-day meeting. Market expectations strongly favor the central bank holding interest rates steady despite ongoing inflation remaining above the Fed's 2% target. According to CME Group's FedWatch tool, there is a 90.6% probability that the FOMC will keep rates unchanged, though markets are also pricing in a 72.1% chance of a 25-basis-point rate hike following the December meeting.

Higher interest rates typically weigh heavily on non-yielding assets like gold, since the precious metal does not pay interest to investors. Kyle Rodda, a senior financial market analyst at Capital.com, noted that while the initial price recovery was largely a symptom of relief provided by lower oil prices, it could easily face caps as markets position for the FOMC decision. Rodda emphasized that gold will continue to trade primarily as a function of interest rate expectations and geopolitical risks.

The broader market downturn has affected multiple asset classes simultaneously. Last week, MCX gold futures fell nearly 4%, while silver dropped 7.32%. The Indian benchmark Nifty 50 also fell 2.36% to close at 22,600 for the week ending October 23, 2026. Analysts point to sustained inflation colliding with slowing economic growth as the root cause of these corrections, compounded by rising crude oil prices due to supply issues and escalating tensions in the Middle East.

In local markets, retail prices reflected these fluctuations. In Bangalore, the 24K gold rate stood at ₹14,275 per gram, 22K at ₹13,085, and 18K at ₹10,706. In Chennai, the yellow metal increased by ₹120 on October 26, reaching ₹1,04,680 per sovereign, or ₹13,085 per gram. Across various international and domestic exchanges, market participants are closely monitoring central bank commentary, Treasury yields, and currency movements to determine future trajectory.

Despite recent pullbacks, experts maintain that gold retains its fundamental role as an economic hedge. A recent report by W by Groww noted that gold's function as a portfolio hedge remains relevant amid geopolitical risks and steady central-bank demand, which saw central banks purchasing 44 tons in July. Analysts suggest keeping gold sized appropriately for protection against geopolitical uncertainties, even as high global bond yields and a strong US dollar create a challenging environment for non-yielding bullion.