Gold holds below $4 000 as market looks ahead to Fed rate hike

Detailed summary

Spot gold was down 0.4% at $3 971.04 an ounce as of 1:42 p.m. in Singapore, while silver fell 0.8% at $51.28.

Gold fell for a third day, holding a drop below $4 000 an ounce as persistent US inflation and hawkish remarks from Federal Reserve officials fuelled expectations for an interest-rate hike next month.

Bullion traded near $3 975 after losing more than 1% in the previous session. Traders are fully pricing in a quarter-point increase in December, while some even see a chance of a half-point hike. October’s consumer inflation report was “borderline disturbing,” according to Federal Reserve Bank of Chicago President Austan Goolsbee.

Yields on two-year Treasuries, which are sensitive to near-term rate policy, have surged 25 basis points so far this week, while a gauge of the dollar jumped almost 1% over Tuesday and Wednesday. Higher borrowing costs are typically a drag on gold as it doesn’t pay interest, while a stronger US currency makes it more expensive for most buyers.

The metal is facing more “downside risk” with a less favourable macro environment, potentially falling toward $3 870 an ounce, Christopher Wong, a strategist at Oversea-Chinese Banking Corp, said in a note. Any upside surprise to the US Producer Price Index due Friday “risks extending the recent pullback” in precious metals, he added.

Traders will be monitoring commentary by US Federal Reserve governor Michael S. Barr and other central bank officials on Thursday while also looking ahead to the PPI data for further clues on the Fed’s upcoming rate decision.

Gold has been unable to sustain its brief rebound above $4 100 an ounce late last month, which came on the back of falling oil prices and a cautious recovery in equity markets.

“The reality is that the near-term outlook is pretty poor,” said Justin Lin, investment strategist at Global X ETFs. “With the AI trade regaining some momentum, it’s becoming a really tough sell to hold onto gold when there’s value to be found in other pockets of the market.”

Spot gold was down 0.4% at $3 971.04 an ounce as of 1:42 p.m. in Singapore, while silver fell 0.8% at $51.28.

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