Gold falls 1.1% on hot inflation and dollar surge
Gold extended losses on Wednesday as hotter US October inflation and Fed rate-hike bets boosted the dollar and pressured bullion prices.
- Gold prices fell 1.1% following the release of U.S. inflation data that was higher than anticipated.
- The inflation report increased market expectations for a larger Federal Reserve interest rate hike, which in turn caused the U.S. dollar to surge.
- A stronger dollar makes gold more expensive for foreign buyers, and the prospect of higher interest rates makes the non-yielding metal a less attractive investment.
Gold prices extended the previous session's fall on Wednesday as hotter-than-anticipated US inflation figures and hawkish comments from Federal Reserve policymakers boosted the dollar and raised the chances of a bigger interest rate hike next month.
Spot gold was down 1.1% at $3,986.79 per ounce by 1:51 p.m. ET (1851 GMT), extending Tuesday's almost 3% fall after recovering to as high as $4,066.77 earlier in the session. US gold futures for December delivery settled 0.7% lower at $4,000.50 per ounce.
Inflation Data and Fed Expectations Drive Losses
"CPI came out a little hotter than expected, and the market is interpreting that it warrants higher rates at the December meeting," said Bob Haberkorn, senior market strategist at StoneX.
Gold fell about 3% on Tuesday after data showed US consumer prices rose a larger-than-expected 0.4% in October. Economists polled by Reuters had forecast a 0.3% rise. Ahead of the data, Fed Governor Christopher Waller said a core inflation reading of 0.3% in October would prompt him to consider a half-point hike at the December meeting.
While markets priced in an 87% chance of a 25-basis-point rate hike in December, bets on a 50 bp increase rose to 12.9% from zero before the CPI reading, boosting the US dollar index to its highest level since April 2025. A stronger dollar makes bullion more expensive for overseas buyers, while the non-yielding metal also becomes less attractive in a high-interest-rate environment.
Central Bank Support and Precious Metals Performance
Haberkorn, however, pointed to strong purchases by top bullion consumer China and other central banks.
"That's really kept the floor on gold despite the short-term fundamental news, which is the Fed and interest rates working against it," Haberkorn said.
Meanwhile, spot palladium was up 1.8% at $1,043.00 per ounce after hitting its highest level since October 22. Still, Deutsche Bank analysts noted that the palladium market may have reached the point where autocatalyst demand erosion intersects with recovering secondary supply, turning a decade of scarcity into a persistent surplus. Spot silver rose 0.7% to $51.88 per ounce.
