Gold market slips as oil prices and U.S. inflation data reinforce Fed hike bets

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Gold market slips on Fed hike bets

Highlights

Spot gold falls 0.6% to $3,997.39 per ounce and U.S. gold futures drop 0.6% to $4,007.80 as rising oil prices and U.S. inflation data boost Fed rate hike expectations.
FedWatch Tool shows traders now price a 75% chance of a December rate hike, while oil climbs toward a fourth straight monthly gain on supply concerns linked to Yemen's Houthi attacks.
Spot silver drops 2.1% to $51.27 per ounce, platinum falls 1.9% to $1,458.85, and palladium slides 2% to $986.08, with all three heading for monthly losses.

Price moves and drivers behind the decline

As reported by Reuters, spot gold is down 0.6% at $3,997.39 per ounce by 0255 GMT, while U.S. gold futures for December delivery fall 0.6% to $4,007.80. The pullback comes as higher oil prices add to inflation concerns and fresh U.S. data show consumer inflation accelerated in September, strengthening expectations that the Federal Reserve could raise interest rates again in December.

Tim Waterer, chief market analyst at KCM Trade, says gold's slide is testing technical support around the $4,000 level. He says earlier dip buying had helped limit losses, but it is still unclear whether value-focused buyers will step back in to support prices.

Waterer also says bullish signals in this week's U.S. macroeconomic data are keeping the Fed on track for a possible December increase. Higher rates typically raise the opportunity cost of holding non-yielding bullion, which tends to weaken gold's appeal.

Broader inflation backdrop weighs on precious metals

Traders are now pricing in about a 75% chance of a December rate hike, according to CME's FedWatch Tool. At the same time, oil prices climb on Friday and are on track for a fourth straight monthly gain, with supply concerns rising after Yemen's Iran-aligned Houthis step up attacks on Saudi Arabia.

Inflation pressures are also evident elsewhere. Data show annual core inflation in Japan's capital exceeds the central bank's 2% target in October, underscoring broader price pressures across major economies.

Other precious metals are also under pressure. Spot silver slides 2.1% to $51.27 per ounce, platinum drops 1.9% to $1,458.85, and palladium falls 2% to $986.08, with all three metals heading for weekly and monthly declines.

In our earlier article, we covered UBS Global Wealth Management’s view that persistent inflation could keep the Federal Reserve on a higher-for-longer path, with additional rate hikes still on the table. We noted that stronger September inflation data pushed market pricing toward another move in December and reinforced expectations for extended tight policy into 2027, signaling a prolonged period of elevated borrowing costs.

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