Gold prices fall as firm dollar, Fed hike bets pressure bullion
Bullion comes under renewed pressure in early trading as stronger U.S. inflation data and hawkish Federal Reserve signals lift the dollar and reinforce expectations of tighter monetary policy. Spot gold touches its lowest level since November 4, with investors also looking ahead to the U.S. Producer Price Index report due on Friday.
Highlights
- Spot gold drops 0.2% to $3,981.49 per ounce and U.S. gold futures fall 0.3% to $3,987.50 as of 0310 GMT.
- The dollar hits a 19-month high and Fed hike expectations increase after hotter-than-expected U.S. inflation data, pressuring gold prices.
- Spot palladium rises 1% to $1,037.25 per ounce while analysts note key drivers for gold remain oil prices, yields, and the U.S. dollar.
Dollar strength and rate outlook weigh on gold
As reported by Reuters, spot gold falls 0.2% to $3,981.49 per ounce by 0310 GMT after earlier touching its lowest level in more than one week. U.S. gold futures for December delivery drop 0.3% to $3,987.50.The dollar climbs to a 19-month high against major peers, making greenback-priced bullion more expensive for holders of other currencies. Expectations for a half-percentage-point Federal Reserve rate increase next month strengthen after data on Tuesday shows U.S. inflation accelerated more than expected in October and policymakers signal a willingness to tighten policy more aggressively.
Ilya Spivak, head of global macro at Tastylive, says the gold market has seen a meaningful pullback over recent days following the inflation data and rising rate hike expectations. He adds that the market is sitting around a critical level near the $4,000 mark.
Investors assess near-term risks across metals
Gold is typically seen as an inflation hedge, but higher interest rates raise the opportunity cost of holding non-yielding bullion and can reduce its appeal to investors. Market participants now await the U.S. Produce Price Index report due on Friday for further signals on the inflation path and policy outlook.Analysts at OCBC say near-term risks remain two-sided, with oil prices, yields and the U.S. dollar continuing to act as key drivers. While the macro backdrop has become less favourable for gold, they say they are not turning bearish on its medium-term prospects.
Among other precious metals, spot palladium climbs 1% to $1,037.25 per ounce.
We have also looked at UBS rate-hike outlook extending into 2027, highlighting expectations for higher-for-longer Fed policy.
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