Gold Prices Slide as US Inflation Strengthens Rate Hike Bets
(MENAFN) Gold prices dropped below $4,100 per ounce on Wednesday after stronger-than-anticipated US inflation figures increased expectations that the Federal Reserve could raise interest rates further.
Gold fell 1.61% to $4,094.57 an ounce by 1310GMT, marking its lowest level since early August. Silver also came under pressure, declining 3.9% to $59.80 an ounce.
Annual US consumer inflation accelerated to 3.7% in September, surpassing analysts’ expectations of 3.6%, largely as rising energy costs pushed prices higher.
On a monthly basis, consumer prices climbed 0.6%, recording their sharpest increase in five months. Core inflation, which excludes food and energy costs, also came in above forecasts, reaching 2.6% year over year and 0.3% month over month.
The latest figures led investors to reconsider the Federal Reserve’s monetary policy outlook, putting pressure on precious metals. Gold and silver do not generate interest income, making them less appealing when higher borrowing costs increase the attractiveness of interest-bearing assets.
Financial markets subsequently estimated a roughly 50% chance that the Fed would keep interest rates unchanged at its October meeting, down from more than 78% before the inflation figures were released.
Meanwhile, the likelihood of an interest rate increase in December climbed to nearly 99%, compared with the previous estimate of 88%.
Although recent communications from the Fed had provided little indication that consecutive rate increases were likely in October, the unexpectedly strong core inflation figures brought that possibility back into consideration.
Gold fell 1.61% to $4,094.57 an ounce by 1310GMT, marking its lowest level since early August. Silver also came under pressure, declining 3.9% to $59.80 an ounce.
Annual US consumer inflation accelerated to 3.7% in September, surpassing analysts’ expectations of 3.6%, largely as rising energy costs pushed prices higher.
On a monthly basis, consumer prices climbed 0.6%, recording their sharpest increase in five months. Core inflation, which excludes food and energy costs, also came in above forecasts, reaching 2.6% year over year and 0.3% month over month.
The latest figures led investors to reconsider the Federal Reserve’s monetary policy outlook, putting pressure on precious metals. Gold and silver do not generate interest income, making them less appealing when higher borrowing costs increase the attractiveness of interest-bearing assets.
Financial markets subsequently estimated a roughly 50% chance that the Fed would keep interest rates unchanged at its October meeting, down from more than 78% before the inflation figures were released.
Meanwhile, the likelihood of an interest rate increase in December climbed to nearly 99%, compared with the previous estimate of 88%.
Although recent communications from the Fed had provided little indication that consecutive rate increases were likely in October, the unexpectedly strong core inflation figures brought that possibility back into consideration.
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