Gold fell to $4,080 after a warmer-than-expected September CPI report, then recovered some of the drop. An Investing.com analysis argues the selloff reflected Fed rate-hike fears rather than a break in gold's trend. It points to a historical record in which gold gained through most Fed hiking cycles.
Gold dropped to $4,080 within an hour of the September Consumer Price Index release, a 1.8% intraday plunge. The Investing.com analysis calls the move a kneejerk overreaction. Gold had traded near $4,140 in the hours before the data.
Rate-hike odds jump after the CPI print
Headline CPI climbed 0.6% month-on-month and 3.7% year-over-year, in line with and 0.1% above economists' consensus. The core version rose 0.3% and 2.6%, both 0.1% warmer than forecasts.
Futures-implied odds of a Fed rate hike at the FOMC's late October meeting soared from 22% to 52% within minutes. The US Dollar Index rose 0.8% to a fresh 18.2-month high, according to the analysis. Gold then closed down 1.5% at $4,101, a new correction low.
Energy prices drove half of the jump
The analysis says half of the headline CPI jump came from surging energy prices tied to the war with Iran. The energy subindex shot up 5.2% MoM and 20.4% YoY. Its author argues that much of the warmer inflation was supply-shock-driven, and that Fed rate hikes cannot restore global oil flows.
Gold rose through most rate-hike cycles
The Fed has executed 13 rate-hike cycles since the dollar's peg to gold was severed in August 1971. Gold averaged 26.3% gains through those cycles. In the eight where it rallied, the average gain was 48.4%.
One modern episode went the other way. In 2022 the FOMC hiked 375bp in 7.6 months, and gold fell 20.9% over a mostly parallel 6.6-month span.
The analysis sees no parallel today. The FOMC hiked 25bp in mid-September 2026, its first hike in 3.1 years, and the author says gold is not likely to plummet again.
Source: Investing.com
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