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Morning Edition · Monday, October 26, 2026Published at 1:15 AM EDT · New York
Gold falls below $4,000 and bitcoin trades near $80,000 as oil-driven inflation revives Fed hike bets
Futures markets price a 92% chance that the Federal Reserve holds rates steady on Wednesday but a 78% chance of a hike in December, after gold fell sharply last week.
Gold traded lower on Monday as traders prepared for the Federal Open Market Committee (FOMC) meeting on October 27 and 28. Spot gold fell 0.2% to $3,987.45 an ounce, extending a sharp decline from the previous week. Earlier in the week it touched $3,975.23.
Rising oil prices were the main driver. Brent climbed sharply last week after Houthi attacks on Saudi Arabia, and recent US consumer and producer price data came in above forecasts. The CME FedWatch tool shows a 92% probability that rates stay unchanged this week and a 78% probability of a hike in December. Investors are also waiting for the inflation measure the Federal Reserve watches most closely, the September Personal Consumption Expenditures (PCE) price index, due on October 29.
Bitcoin fell at the same time. CoinDesk reported that it slipped below $80,000 as traders cut risk before the meeting, with ether and XRP leading losses among the major tokens. Investing.com put bitcoin near $80,400 on Sunday after a weekend selloff and heavy liquidations of leveraged positions. CoinDesk linked the decline to weakness in artificial-intelligence (AI) stocks in Asia, where Goldman Sachs cut its target for South Korea's Kospi by a quarter. Israel's Globes reported mixed trading in Asia, with South Korean chipmakers little changed and oil prices and US Treasury yields both lower in the morning.
Goldman Sachs also argued, according to Mint, that the yen has become a better hedge against an AI-driven market shock because changes in Japan's policy backdrop make it less vulnerable to rising global yields. The Bank of Japan and the European Central Bank also announce policy decisions this week.
Part of a tracked trend
Renewed Fed Tightening Fears Rattle Global Markets
Over the next 3-6 months stronger US data revives expectations of Fed rate hikes, driving a firmer dollar, equity selloffs in export-heavy markets, and pressure on hard assets as the IMF warns of recurring economic shocks.
What this means
The mechanism is real interest rates. An oil supply shock pushes up headline inflation. A Fed that answers with hikes raises the yield investors give up by holding gold, which pays nothing, and it drains the dollar liquidity that bitcoin depends on. Gold holders and leveraged crypto positions are exposed first. Export-heavy Asian equity markets come next as the dollar firms. A December hike is already about 78% priced, so the new information on Wednesday is the guidance, not the decision itself. From a sound-money view, the consensus has the causality backwards: higher rates do not create barrels of oil, so tightening into a supply shock mainly compresses demand and asset prices. The 1970s show that this pattern usually ends with the central bank retreating once growth weakens. The likelier near-term outcome is more pressure on gold and bitcoin for weeks, provided the PCE data confirm hot inflation. Over months, gold should recover sooner than bitcoin if growth data roll over and the hike path gets priced back out. A soft PCE reading, or a Fed statement that treats the oil shock as temporary, would prove this read wrong and lift both assets immediately.
What to watch
- The wording of the Fed statement on Wednesday about energy prices. Language calling the oil shock temporary would undercut the December hike pricing, and language about second-round effects would confirm it.
- The September PCE release on Thursday. It is the last major inflation data point before markets settle on December expectations.
- Whether bitcoin keeps falling with Asian AI stocks or starts moving with gold. A shift toward gold would be the first evidence against the view that bitcoin trades as a risk asset.
Observations to monitor, not financial advice.
Synthesized from: Investing.com Commodities · CoinDesk · Mint (Economy) · Globes (Hebrew)
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Comments
1Oct 26, 5:15 AM
Gold falling while Houthi strikes push Brent higher shows the rate channel outweighing haven demand, so a soft September PCE print on October 29 should lift gold more than any new attack.