Gold fell 1.5% to $4,100.16 an ounce on Wednesday after a September U.S. inflation report came in mostly hotter than expected. Traders now see a 43.7% chance of another Fed rate increase this month, according to CME FedWatch.
Spot gold fell 1.5% to $4,100.16 an ounce at 06:06 ET on Wednesday, while gold futures declined 1.3% to $4,122.59. Traders assessed the Federal Reserve's outlook for further monetary policy tightening.
Higher interest rates generally weigh on gold because bullion does not pay interest. The metal has fallen around a fifth from its levels since the Iran war erupted in late February, as energy-driven inflation concerns and central bank tightening weighed on prices.
Energy shock lifts September inflation
Headline and underlying U.S. consumer price growth accelerated by more than anticipated on an annualized basis in September. The report underlined the impact of an energy shock linked to the Iran war.
The energy portion of the Labor Department's consumer price index gained 5.2% in September, following a 2.1% increase in August. Gasoline prices jumped 9.1%, accounting for over half of the monthly rise in all items, the Labor Department said.
Rate hike bets grow
Traders are now weighing the possibility of another rate hike. Last month, the Fed hiked rates by a quarter of a percentage point, its first increase since 2023.
According to CME FedWatch, there is now a 43.7% chance of another 25-basis-point rise, versus roughly 22% a day ago. The probability that the Fed holds rates steady fell to around 56% from 78%.
Sygnum Bank's Can-Luca Koymen said the hotter-than-anticipated core CPI figure puts an October hike "back in play", according to Investing.com. The Fed's October 27-28 gathering comes before the release of the personal consumption expenditures price index.
The U.S. dollar index inched up 0.6% to 102.81, and a stronger dollar can make gold less attractive to overseas buyers.
Source: Investing.com
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