Gold prices drifted below $4,000 an ounce as a surging U.S. dollar and firming Federal Reserve interest-rate hike expectations pressured the precious metal.
Spot gold fell 0.2% to $3,981.49 per ounce by 0310 GMT, touching its lowest level since November 4, according to BusinessLine. U.S. gold futures for December delivery dropped 0.3% to $3,987.50.
The retreat followed a hotter-than-expected U.S. consumer price index report for October. The data spurred traders to fully price in a December rate increase, with the odds of a half-percentage-point hike surging after the release.
Dollar Strength and Rising Treasury Yields Pressure Gold
The U.S. dollar index climbed toward 102.90, approaching its highest level since April 2025, as reported by Kitco News. A stronger dollar makes greenback-denominated bullion more expensive for holders of other currencies.
Benchmark 10-year Treasury yields briefly exceeded 5.00% following the inflation figures. Higher yields increase the opportunity cost of holding non-yielding bullion.
“The (gold) market has had a meaningful pullback over the past several days in the wake of that US inflation data and the rise in rate hike expectations around that, but I think the markets are pointedly struggling for a follow through,” said Ilya Spivak, head of global macro at Tastylive. “We’re kind of sitting on a critical level here, basically just around the $4,000 mark,” Spivak added.
Fed Officials Maintain Hawkish Tone Amid Rate Hike Expectations
Federal Reserve officials maintained a hawkish tone following the inflation data. Philadelphia Fed President Anna Paulson said that the central bank has more rate increases ahead to lower elevated levels of inflation, ET BFSI reported. Analysts at Rabobank said that recent comments from policymakers, “including those from Waller that put the risk of a 50-bps rate hike on the table,” reflect a shift in market sentiment, according to VG Markets.
The market is now “fully priced for a December rate hike,” Rabobank analysts said, adding that the signals were “met with no real speculation that the Fed would be pressured by political forces not to raise rates.” Rabobank also highlighted that “since Fed Chair Warsh surprised the market with a hawkish position at Jackson Hole in August, fears about diminished Fed credibility have dissipated.” Furthermore, “the results of last week’s midterm elections suggest less reason to expect pressure from the White House,” reinforcing expectations that the central bank can proceed with tightening plans.
Geopolitical Risks and Other Precious Metals
Geopolitical tensions surrounding the Strait of Hormuz and U.S.-Iran relations provided competing influences. Iranian security chief Mohsen Rezaei said that Tehran would not allow enriched nuclear material to leave the country and maintained that Washington must address Tehran’s conditions before negotiations proceed.
Among other precious metals, spot palladium climbed 1% to $1,037.25 per ounce, according to BusinessLine. Market participants await the U.S. Producer Price Index report scheduled for release.
“We continue to see two-way risks in the near term, with oil prices, yields and US dollar remaining important drivers. While the macro backdrop has become less favourable for gold, we are not turning bearish on its medium-term prospects,” analysts at OCBC said in a note cited by BusinessLine.
Earlier coverage: Gold Prices Rebound Over 1% as US Dollar and Treasury Yields Retreat
