Gold prices were little changed on Wednesday as investors braced for US consumer price index data due later in the day to gauge the Federal Reserve’s latest monetary policy stance.
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Gold fell over 1% on Wednesday, extending losses for a third straight session, as a stronger-than-expected inflation reading increased U.S. Federal Reserve rate hike bets for October.
Spot gold dropped 1.5% to $4,093.03 an ounce, its lowest since October 7. U.S. gold futures for December delivery fell 1.5% to $4,115.50 an ounce.
The U.S. dollar index climbed 0.4%, making greenback-denominated gold more expensive for holders of other currencies, while 10-year U.S. Treasury yields also rose.
“At this point it portends that the Fed is more likely to raise interest rates,” David Meger, director of metals trading at High Ridge Futures, said, citing hotter-than-expected consumer price index (CPI) data that has remained above Fed targets.
“As a result, we’ve seen the dollar rise and pressure added to the gold market.”
The CPI rose 0.6% last month after climbing 0.4% in August, the Labor Department’s Bureau of Labor Statistics said on Wednesday.
Markets see about a 35% chance of a U.S. rate hike this month, up from about 22% before the inflation data, and are pricing a roughly 90% probability of an increase in December, according to CME’s FedWatch tool.
While gold is typically seen as a hedge against inflation, higher interest rates tend to diminish the appeal of non-yielding bullion.
Fed Vice Chair for Supervision Michelle Bowman said the central bank has time to wait and see how financial markets and the economy evolve after its September rate rise before deciding whether to take any more action.
Oil prices rose on Wednesday after an attack on the headquarters of Saudi Arabia’s state-owned oil company, while Iranian officials told Reuters they were deploying new tactics to target ships, seeking to keep oil prices high and influence U.S. midterm elections.
“In the longer term, gold should again benefit from continued strong central-bank buying and renewed concerns over U.S. debt and its rising interest burden,” said Julius Baer analyst Carsten Menke.
Among other metals, spot silver fell 6.5% to $55.60 per ounce, platinum dipped 3.5% to $1,604.20 per ounce and palladium fell 2.7% to $1,095.41 per ounce.
