Spot gold prices fell to $4,006 per ounce, weighed down by U.S. inflation data and expectations of a December rate hike,amid a broad decline across precious metals.
Precious metals markets opened Asian trading with a fresh drop in gold prices, extending the downward trend that began in the previous session with a loss of over 1% of its value. The decline was driven by higher U.S. inflation data, which strengthened the likelihood of the Federal Reserve raising interest rates once again, putting downward pressure on the yellow metal's appeal.
Gold Price Movements and Futures
Spot and futures trading for gold recorded modest declines at the start of the session:
Spot Gold: Fell 0.4% to reach $4,006.06 per ounce.
U.S. Futures (December Delivery): Dropped 0.3% to settle at $4,018.50 per ounce.
Time Horizon: Although gold is on track to end the week with slight gains, it is heading toward consecutive monthly losses for the second straight month.
U.S. Rate Bets and Monetary Policy
Direct selling pressure on gold stems from monetary policy determinants and the interest rate market:
U.S. Inflation: The Consumer Price Index (CPI) accelerated during September, driven by rising prices for energy,fuel, and basic commodities.
Federal Reserve Expectations: The CME FedWatch tool indicates that markets are pricing in an approximately 75% probability of an interest rate hike at the upcoming December meeting.
Opportunity Cost: Sustained high interest rates increase the opportunity cost of holding non-yielding gold compared to bonds and cash.
Major Global Central Bank Actions
Pressures from the U.S. market coincided with hawkish signals from major central banks:
European Central Bank (ECB): Kept interest rates unchanged at its recent meeting while hinting at a potential December rate hike to counter inflation risks stemming from surging energy costs, alongside the announced resignation of its President, Christine Lagarde, set for February 7.
Tokyo Inflation Data: Core inflation figures for the Japanese capital in October revealed a notable overshoot of the Bank of Japan's 2% target, strengthening the case for monetary policy tightening there.
Performance of Other Precious Metals
Other precious metals were not immune to selling pressure, collectively heading toward weekly and monthly losses:
Silver: Spot prices fell 1% to $51.87 per ounce.
Platinum: Held steady at $1,488 per ounce.
Palladium: Declined 0.5% to settle at $1,000.75 per ounce
