Gold prices edged lower on Thursday as the U.S. dollar and Treasury yields made gains following the release of U.S. consumer price data for September, which exceeded expectations. This development raised concerns that the Federal Reserve may opt to keep interest rates at elevated levels for an extended period.
At 3:04 p.m. ET (1904 GMT), spot gold experienced a 0.3% decline, settling at $1,868.79 per ounce, after reaching its highest level since September 27 earlier in the trading session. Simultaneously, U.S. gold futures settled 0.2% lower, closing at $1,883.
According to the Labor Department, the consumer price index rose by 0.4% last month, following a 0.3% gain in August. Nevertheless, it’s worth noting that year-on-year consumer prices have moderated from their peak of 9.1% in June 2022.
Despite the dip, some market experts remain cautious about a significant gold sell-off. Tai Wong, an independent metals trader based in New York, commented, “The warm CPI print might be enough to slow gold’s formidable rally into a consolidation but in itself shouldn’t trigger a serious selloff, especially given high geopolitical tensions.”
The probability of a rate hike in December, as estimated by traders using the CME Fedwatch tool, has now risen to 38%, up from about 28% prior to the release of the consumer price data.
Subsequent to the data release, U.S. benchmark 10-year yields and the dollar index both observed upward movements.
Amidst ongoing geopolitical tensions, including the escalating conflict between Israel and the Palestinian militant Islamist group Hamas, gold continues to find support as a safe-haven asset. Gold often serves as a refuge for investors during times of political and financial uncertainty. However, the surge in interest rates has increased the opportunity cost of holding non-yielding gold.
Edward Moya, Senior Market Analyst at OANDA, noted, “There are still some signs that there is a slowdown in the U.S. economy; this should benefit gold. I anticipate prices could trade in the $1,860-$1,920 range in the near term.”
In other precious metal markets, spot silver experienced a 1.2% decline, falling to $21.79 per ounce, while platinum dropped 2.2% to reach $865.87. Palladium also slipped by 2.9%, closing at $1,132.75.
