Gold fell 0.2% to $4,164.45 per ounce by 0201 GMT as the dollar held near an 18-month high. Traders weighed whether U.S. inflation data would prompt higher interest rates and shift investment toward assets that pay yields. U.S. gold futures for December delivery slipped 0.1% to $4,187.90.
Who Holds the Leverage
The firm dollar made dollar-denominated metals more expensive for holders of other currencies. It stayed near an 18-month high reached in the previous session, putting pressure on gold after the metal hit a one-week peak on Monday.
A separate spot-market snapshot showed gold down 0.2% at $4,163.71 an ounce at 0017 GMT. Investors in early Asian trade took a wait-and-see stance before U.S. inflation reports and major U.S. bank earnings, Peter A. Grant, vice president and senior metals strategist at Zaner Metals, said in a note.
Gold pays no interest. When rates are high, investors typically favor assets that offer yields instead. Higher rates generally weaken the precious metal’s appeal, so the Federal Reserve’s decisions remain central to traders’ calculations.
Traders see a 21% chance of a Federal Reserve rate hike this month and have priced in an 88% chance of a December increase, according to CME’s FedWatch tool. Those probabilities reflect how market participants are positioning around the central bank’s next moves; they aren’t announced rate decisions.
Inflation Data and Federal Reserve Policy
The Consumer Price Index report is due Wednesday, followed by the Producer Price Index report on Thursday. The figures will help markets assess the Federal Reserve’s interest-rate path. U.S. CPI data will be critical for gold in the short term, said Kyle Rodda, senior financial market analyst at Capital.com.
If inflation comes in hotter than expected, particularly on the core measure, and even modestly boosts expectations of an October rate hike, gold could dip again, Rodda said. His assessment ties the inflation reading to the rate outlook and the resulting pressure on an asset that pays no interest.
Cleveland Fed President Beth Hammack said the central bank should move “relatively quickly” to a more restrictive monetary policy stance to control inflation. She said inflation had spread more broadly and was beginning to influence firms’ price-setting plans. The proposed response is tighter money, aimed at inflation and firms’ pricing decisions.
Grant said investors would also assess other U.S. economic data and a heavy slate of Federal Reserve speakers to gauge the likelihood of further rate hikes that year. Major U.S. bank earnings were another focus for markets during the week.
Other Markets
Saudi Arabia said it faced a new barrage of incoming fire and that Riyadh airport would remain shut for now. The announcement came days after Saturday’s deadly missile strike on a departure terminal, claimed by Yemen’s Iran-allied Houthis.
Other metals also fell. Spot silver eased 0.5% to $60.01, platinum slipped 0.2% to $1,682.47, and palladium dropped 0.5% to $1,137.69. Ashitha Shivaprasad reported from Bengaluru; Rashmi Aich edited the market report.