Gold falls as high oil prices keep inflation and rate-tightening concerns active

Steuart: housing slump threatens Canadian lumber producers

Gold futures settled lower for a second consecutive session on October 20 as high oil prices kept inflation and interest-rate expectations in focus. Front-month gold slipped 0.4% in New York to $4,122.40 a troy ounce, while silver gained 1.3% to $57.706 a troy ounce.

Fawad Razaqzada of Forex.com said the bearish trend may have lost momentum, “but there is no compelling evidence that the metal has bottomed out yet.” He said, “Renewed inflation concerns from both hard and soft data, as well as rising oil prices, have raised concerns that central banks will have to tighten their policies further in the coming months.” Central-bank gold purchases provide some support and cushion downside risks, Razaqzada said, but may not be enough to prevent at least a temporary break below $4,000.

A deepening slump in U.S. home construction is threatening Canadian lumber producers, according to TD Cowen analyst Sean Steuart. U.S. housing starts fell 5.2% in September to an annualized 1.221 million units, missing estimates by 6.4% and hitting near six-year lows, Steuart said. Single-family starts, which consume more lumber, were down 4.0% year to date compared with last year. Steuart said residential building accounts for 31% of North American lumber volume. “With rising mortgage rates, we see no obvious near-term catalysts for an affordability reversal,” he said. He identified West Fraser, Canfor, Interfor and Western Forest Products among the most exposed Canadian lumber producers.

Mining and metals report production, cost and supply details

BHP Group reported quarterly copper output of 400,700 tons in its first quarter. RBC Capital Markets said the figure was 6% below consensus. BHP said its average realized copper price was US$7.01 per pound in the quarter, which RBC said was 8% above its expectation. RBC analyst James Redfern said: “Overall, a strong quarter for BHP’s bulk commodities while consensus appears to have underestimated the pace of the copper grade decline at Escondida and Pampa Norte in Chile.” RBC had a sector-perform call and a target price of 60.00 Australian dollars on BHP ahead of the update. BHP shares were down 2.2% at A$59.13 in early trade.

Anglo American’s third-quarter production update was mixed, J.P. Morgan analyst Dominic O’Kane wrote. Quarterly copper production was slightly lighter than expected, but the miner lowered full-year copper-cost guidance by another 4%. O’Kane said the reduced guidance should lead to a small upward revision to full-year earnings consensus. Anglo American shares rose 2.3% to 3,972 pence.

Press Metal Aluminium’s recent share-price weakness could reflect concerns over Indonesian market uncertainty, temporary power curtailments and softer aluminum demand, Citi analyst Ryan Davis said. Davis identified reduced power supply as the most immediate risk. If reduced power supply lasted a quarter, annual output could fall by 0.75% and net profit by about 1.4%, although additional scrap use may limit the impact. Davis said slower Chinese demand and higher interest rates could weigh on aluminum prices in the near term, but he remained cautiously positive on the metal into 2027, citing low inventories and demand from electrification, AI and power infrastructure. Citi has a buy rating and a 10.60 ringgit target price on Press Metal, whose shares were 0.9% higher at 6.74 ringgit.

MSI previously reported that spot gold fell 0.8% on June 19 as a more hawkish Federal Reserve outweighed relief from the U.S.-Iran interim peace deal. By October 20, rising oil prices and renewed inflation concerns had again raised expectations of tighter central-bank policy, keeping gold under pressure even as central-bank purchases offered support.