Gold prices edge lower as US inflation data reinforces Fed outlook

[BENGALURU] Gold prices eased in early Asian trade on Friday (Oct 30) after dropping more than 1 per cent in the previous session, as stubborn US inflation fuelled expectations of further US Federal Reserve rate hikes, weighing on bullion.

Spot gold was down 0.4 per cent at US$4,006.06 per ounce by 0036 GMT, while US gold futures for December delivery droped 0.3 per cent to US$4,018.50.

Bullion is headed for a modest weekly gain but remains on track for a second consecutive monthly decline.

US inflation accelerated in September as consumers paid more for petrol and other goods, supporting economists’ expectations of an interest rate increase from the Fed in December.

Traders are now pricing in about a 75 per cent chance of a rate hike in December, according to the CME’s FedWatch Tool.

Higher interest rates increase the opportunity cost of holding non-yielding bullion, reducing its appeal to investors.

The European Central Bank (ECB) left interest rates unchanged in a well-telegraphed move on Thursday but clearly hinted at another hike in December with a warning that high and rising energy costs were fuelling inflation risks.

ECB President Christine Lagarde will step down from her role on Feb 7, the central bank said.

Annual core inflation in Japan’s capital well exceeded the Central Bank’s 2 per cent target in October, data showed on Friday, highlighting mounting price pressure and cementing the case for further interest rate hikes.

SEE ALSO

Gold looks to greenback for next direction

Gold liquidity deep enough for Asian, Western hubs to coexist, Hong Kong and Singapore say

Strategic case for precious metals

The London Metal Exchange is aiming to turn metal held in its Hong Kong warehouses into digital assets that can be used for financing, a move linked to the territory’s five-year plan to expand its commodities hub, three people with knowledge of the matter said.

Spot silver slid 1 per cent to US$51.87 per ounce, platinum steadied at US$1,488.00 and palladium fell 0.5 per cent to US$1,000.75. All three metals were headed for weekly and monthly declines. REUTERS