Gold heads for its worst week since June as Brent hits $114 and UK PMI beats

Gold is heading for its heaviest weekly fall since June after briefly dropping below $4,000 an ounce on Friday, while Brent crude climbed to about $114, its highest level since early May. In the UK, the strongest business survey since February outweighed a drop in retail sales, and the pound held close to a 17 month high against the euro.

The week ends with a clear message from the markets: oil is now the main driver of interest rate expectations, and those expectations are steering gold, the euro and sterling. Higher energy prices raise the risk that inflation stays sticky, which makes it harder for central banks to cut and easier for them to hike. That is uncomfortable for an asset that pays no interest, such as gold, and helpful for currencies whose central banks look most willing to act, such as the pound.

We share short updates on these moves during the trading day on our free Forexuro Telegram channel, including the levels we watch before big releases.

Gold dips under $4,000 before steadying

Spot gold fell as low as $3,986.50 an ounce in early European trading, the weakest level since 20 July, according to Reuters figures reported by CNBC. By 09:36 GMT it had recovered to about $4,026, but it was still down roughly 3.5% on the week. That would be a second weekly loss in a row and the steepest since June. US gold futures for December delivery were 0.5% lower at $4,040.70.

Most of the damage came on Thursday, when gold dropped close to 3% in a single session. Friday was calmer, with the metal holding just above $4,000 through the European morning. The other precious metals followed the same path: silver was 1.2% lower near $53.89, and platinum lost 0.8% to about $1,557.

Why oil is weighing on gold this time

In a crisis, investors often expect gold to rise. This week shows why that rule of thumb does not always hold. The conflict in the Middle East is pushing oil higher, and dearer energy feeds straight into inflation. If inflation stays higher, central banks keep rates higher, and real yields (interest rates after inflation) stay attractive compared with a metal that pays nothing.

Hamad Hussain, an economist at Capital Economics, put it this way in comments carried by Reuters: "The rise in oil prices could result in real interest rates remaining higher for longer, which would reduce the relative attractiveness of investing in and holding gold." That is the chain of cause and effect traders have been pricing all week, and it explains why gold slid even as geopolitical risk rose.

The US rate picture matters most here. According to CME FedWatch figures quoted by Reuters, markets put about a 9% chance on a Federal Reserve hike at the meeting on 27 and 28 October, and about 81% on a hike by December. US PCE inflation data, the Fed's preferred price gauge, is due on 29 October. Our guide to the PCE release explains what the number covers and why it can move gold.

Brent touches $114 on Gulf attacks

Brent crude pushed up towards $114 a barrel. Bloomberg reported Brent up 0.4% at $113.65, its highest level since early May. The rally extends the move that followed this week's Houthi attacks in Saudi Arabia, which we covered in Thursday's market report.

For currency traders, oil at these levels is not just a commodity story. It raises import bills for energy importers such as the euro area and Japan, and it lifts inflation forecasts almost everywhere. That is why the oil price has become a useful first check each morning before looking at gold or the major pairs.

Euro set for a weekly drop after a soft PMI

The euro was down 0.15% at $1.1198 around midday, on course for a weekly fall of about 0.4%, Reuters reported. Against the yen it was weaker still: EUR/JPY touched 175.42, its lowest since October 2025, and was heading for a weekly loss of around 1.2%.

The trigger was the flash euro zone PMI, which showed the weakest business growth in four months, with France slipping into contraction. The survey made it harder to argue that the euro area can absorb another energy shock without a slowdown. European shares also felt it, with the Stoxx 600 down 0.4%, according to Bloomberg. The European Central Bank meets next Thursday, and our ECB rate decision explainer covers how those meetings usually move EUR/USD.

UK PMI hits its best level since February

The UK was the bright spot of the morning. The flash composite PMI rose to 53.1 from 52.0, the strongest reading since February, according to Reuters. Firms reported hiring for the first time since the 2024 budget, and manufacturing output grew at its fastest pace in more than two years.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey made a Bank of England rate hike look like a near certainty. That view matters for sterling because markets have been weighing whether the Bank will need to respond to higher energy prices. The next BoE decision is on 5 November. If you want to see how a PMI print is built and why traders react to it, our PMI event guide walks through it.

Retail sales fall as warm weather hits clothing

The other UK release told a softer story. The Office for National Statistics said retail sales volumes fell 0.4% in September, after a revised 0.7% rise in August. Economists had expected a smaller fall of about 0.1%, according to FXStreet. Excluding fuel, sales dropped 0.7%.

The ONS pointed to unusually warm weather, which held back sales of autumn clothing. The longer view was less gloomy: volumes rose 0.7% over the third quarter as a whole and were 0.8% higher than a year earlier. GBP/USD dipped only slightly after the release, trading near 1.3388 shortly afterwards. The retail sales guide explains why one weak month often matters less to currency markets than the trend.

Sterling near a 17 month high against the euro

Put together, the two UK releases left the pound in good shape. Reuters reported EUR/GBP at about 83.70 pence after touching 83.62 pence, the lowest for the euro against sterling since May 2025. The pound was on course for a fourth straight weekly gain against the single currency.

Against the dollar, sterling eased 0.15% to about $1.3381 after reaching $1.3418 on Thursday. Bloomberg had the pound 0.2% lower at $1.3378. The move higher in the dollar was modest, but it was enough to take some of the shine off GBP/USD after a strong run.

The contrast between the two PMI surveys is the core of the story. A strong UK reading and a weak euro zone reading point to different paths for the Bank of England and the ECB, and EUR/GBP is the pair that reflects that gap most directly. Our EUR/GBP pair page covers the pair's main drivers, and the EUR/GBP outlook for the week of 26 October sets out the levels in focus.

Budget week looms for the pound

Next week brings the UK budget from finance minister John Healey. Prime Minister Andy Burnham said the government wanted to give the economy "breathing space to grow", according to Reuters. A separate survey this week showed UK consumer confidence falling sharply, which leaves the budget with a difficult balance between support for households and the cost of borrowing.

Budgets can move gilts and sterling quickly when they change the outlook for borrowing. Traders who hold GBP positions into the statement should expect wider spreads and faster moves around the announcement, and size their trades with that in mind. Our position size calculator helps keep the money at risk fixed when stops need to be wider.

Yen holds gains as Japan inflation picks up

The dollar was flat at about 156.73 yen on Friday after the Japanese currency rallied earlier in the week, Reuters reported. At its strongest, the yen reached 156.08 per dollar. Japan's core inflation rate rose back above 2% for the first time in nine months, which supports the case for a Bank of Japan hike in December, even though markets expect the BoJ to hold next Friday.

Not everyone thinks the yen's rally will last. Deutsche Bank's Shoki Omori told Reuters that "the yen was bought as a hedge, not as an allocation", and he expects USD/JPY to trade in a range of about 155 to 159 into the BoJ meeting. The BoJ rate decision guide covers what to expect from that meeting.

Dollar steadies as yields bounce

The dollar index rose 0.16% to about 101.75, having dropped to 101.44 on Thursday, according to Reuters. The US 10 year Treasury yield climbed 3.5 basis points to about 4.99%, after falling 19.5 basis points the day before. That rebound in yields added a little pressure on gold during the morning.

Elsewhere, the Canadian dollar traded stronger than C$1.40 per US dollar, helped by higher oil, while USD/CHF was near 0.8199 and AUD/USD around $0.7016. ING's FX team headlined its Friday note with the view that the dollar has lost its safe haven crown, a theme that fits the yen's gains during this week's stock market wobble. Nasdaq 100 futures were up 0.4% after their worst day since June, Bloomberg reported.

What to watch

• Oil: whether Brent holds above $110 or extends past $114 after the weekend's Middle East headlines.
• Fed, 27 and 28 October: any hint that the Fed is closer to a hike would add pressure on gold.
• US PCE inflation, 29 October: a hot reading would support the dollar and yields.
• ECB meeting, next Thursday: the weak PMI puts the focus on growth risks for the euro.
• UK budget: the main event risk for sterling and gilts next week.
• BoJ, next Friday: a hold is expected, but guidance on December matters for USD/JPY.

We will post a short preview before each of these events on the Forexuro Telegram channel, so you can see the key levels before the numbers land.

What this means for signal traders

This week is a reminder that gold can fall during a geopolitical crisis when the rate outlook moves against it. Anyone trading XAUUSD should keep an eye on oil and US yields as well as on the headlines. A drop of nearly 3% in one session also shows how quickly gold can move through levels, so a stop loss that would be comfortable on a quiet day may be too tight this week. Our gold position size calculator turns a wider stop into a smaller position, so the cash risk stays the same.

For sterling pairs, the gap between the UK and euro zone surveys supports the idea of a stronger pound against the euro, but the budget adds a clear event risk. If you would rather follow structured trade ideas than build every plan yourself, you can see how our forex and gold trade setups are laid out, with entry, stop loss and three targets, and check the public results record before you decide. If you want to learn to read these moves on your own, the Forexuro video courses cover macro drivers, gold and risk control in depth.

Official sources

Official pages for the decisions, data and schedules behind this report.

• LBMA Gold Price, the London benchmark price for gold in US dollars per troy ounce.
• US Bureau of Economic Analysis: PCE price index, the inflation measure the Fed targets.
• Federal Reserve: FOMC meeting calendars, scheduled rate decision dates, statements and minutes.

Frequently asked questions

Sources

• Reuters via CNBC: Gold heads for steep weekly loss as oil prices fuel Fed rate concerns
• Bloomberg via swissinfo: Tech rout eases with oil strength capping relief
• Reuters via Euronext: Euro set for weekly drop, yen eyes biggest gain since early September
• Reuters via Euronext: Sterling edges to fresh 17 month high versus euro after UK data
• Reuters via Investing.com: UK businesses report strongest month since February, PMI shows
• Office for National Statistics: Retail sales, Great Britain, September 2026
• FXStreet: United Kingdom retail sales fall 0.4% in September
• Reuters via Investing.com: Yen shines as AI jitters spur safe haven rush
• ING Think: FX Daily, dollar has lost its safe haven crown
• Data for the charts: Yahoo Finance (GC=F, BZ=F and EURGBP=X daily closes).

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