Gold prices edged lower on Tuesday as weak US housing data did little to ease concerns about persistent inflation and the prospect of further Federal Reserve tightening. Silver moved higher, while elevated oil prices and rising Treasury yields continued to complicate the outlook for precious metals.

At the time of writing, spot gold traded near $4,122.30 an ounce, down 0.44%, while spot silver rose 0.42% to around $57.21.

The market remains caught between signs of weakness in interest-rate-sensitive sectors and inflation readings that could keep monetary policy restrictive for longer.

Futures markets are pricing in an 82.8% probability that the Fed will leave rates unchanged at its October 27-28 meeting, against a 17.2% chance of a 25-basis-point increase.

The probability of a rate increase by December 9 stands at 93.6%.

Housing data adds to uncertainty

US housing starts fell 5.2% in September to a seasonally adjusted annual rate of 1.22 million, down from August’s revised 1.288 million. Compared with the same month last year, starts declined 7.4% from 1.319 million.

Single-family housing starts dropped 4.6% to 859,000 from 898,000 in August, while the 12-month average stood at 894,000.

Building permits also weakened. Total permits for new construction declined 0.2% to 1.40 million, while single-family permits fell 4% to 845,000 from 880,000 in August.

The figures point to continued pressure on the housing sector, where higher borrowing costs and construction expenses have weighed on activity.

The National Association of Home Builders’ housing market index fell to 29 in September from 32 in August, reaching its lowest level since June 2012.

The housing data could support expectations of a Fed pause in October by highlighting the effects of restrictive financial conditions. However, weakness in housing alone may not be enough to change the central bank’s approach while inflation remains elevated.

Inflation keeps December rate hike in focus

September’s inflation figures remain a major concern for financial markets. Consumer prices increased 0.6% month over month and 3.7% year over year, while producer prices climbed 1.3% monthly and 6.3% annually.

These readings have reinforced expectations that the Fed may need to maintain higher interest rates for longer.

Although an October hold is now the most likely outcome according to futures pricing, the December meeting remains a focal point for investors.

This week’s economic calendar includes pending home sales on Tuesday, weekly jobless claims on Thursday, and industrial production, manufacturing and services purchasing managers’ indexes on Friday. The University of Michigan’s preliminary October consumer sentiment survey is also due Friday.

Softer employment and business activity data could ease pressure on Treasury yields and offer support to gold. Stronger figures or continued inflation pressure could instead reinforce expectations of further tightening.

Oil prices complicate outlook for precious metals

Energy markets remain another important influence on bullion. Nymex WTI crude traded near $100.64 a barrel, while Brent crude stood around $111.30. The 10-year US Treasury yield was near 5.10%, and the dollar index edged lower from Monday’s high of 101.97.

Oil prices have remained elevated amid security concerns around the Strait of Hormuz and tensions involving the United States and Iran. Higher energy costs can add to inflation and make it harder for the Fed to ease monetary policy.

That creates a mixed backdrop for gold. Geopolitical uncertainty can encourage safe-haven demand, while higher oil prices may prolong restrictive monetary policy and weigh on non-yielding assets.

Silver may also benefit from easing rate pressure, although concerns about industrial activity can influence its performance.

For precious metals, the next moves will depend on whether incoming economic data ease inflation concerns and allow Treasury yields to retreat, or reinforce expectations that the Fed will keep rates elevated into December.

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