Gold hits over one-week low as dollar rallies on inflation data

[BENGALURU] Gold prices fell to their lowest level in more than a week on Friday (Oct 29), weighed down by a stronger dollar after US data showing inflation stayed hot last month put the focus back on the Federal Reserve's policy meeting next week.

Spot gold fell 0.9 per cent to US$1,782.23 per ounce by 6.10 pm GMT. US gold futures for December settled down 1 per cent at US$1,783.90 per ounce.

The consumer spending data fueled worries about aggressive monetary policy action from the Fed to combat a surge in prices, sending yields on the US 10-year note up as high as 1.6190 per cent, and the dollar surging 0.8 per cent.

"Traders across global markets have aggressively raised their outlook for policy tightening, as an energy crunch and snarled supply chains drive inflation higher, leading market participants to price the risk of a faster exit," analysts at TD Securities said in a note.

While gold is considered an inflation hedge, reduced stimulus and interest rate hikes tend to push government bond yields and the dollar up, denting non-yielding gold's appeal.

The Fed is expected to announce when it will start tapering at the end of its Nov 2-3 monetary policy meeting.

"There isn't anything that can stop gold's decline right now," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago, adding that funds become active sellers each time gold crosses the key US$1,800 per ounce level.

Overall, worries about rising prices kept both gold and silver on track for monthly gains of over 1 per cent and 7 per cent, respectively.

On the physical side, gold was selling at a premium in India this week as consumers flocked to retailers ahead of big festivals next week.

Spot silver fell 1 per cent to US$23.85 per ounce.

Platinum steadied at US$1,019.49 per ounce. Palladium rose 0.3 per cent to US$1,994.68 per ounce.

REUTERS