Gold set for a weekly drop as traders assess Fed signals

GOLD prices were set for a weekly loss as traders weighed the prospect of further US Federal Reserve rate hikes in 2026, following a run of hotter-than-expected US inflation data.

Spot gold was up 0.1 per cent at US$4,175.34 per ounce by 1.44 pm GMT, and was down 0.4 per cent so far in the week.

US gold futures for December delivery rose 0.7 per cent to US$4,198.20 per ounce.

“We’re very much rangebound and tilting towards the lower bound of support, the main reason being we still have a lot of ambiguity in what the Fed will do,” said Bart Melek, global head of commodity strategy at TD Securities.

Fed chair Kevin Warsh voiced optimism about US economic strength but gave no clues about the central bank’s rate-path trajectory.

Data on Thursday (Oct 15) showed US producer prices increased by the most in 4½ years in September. The data followed Wednesday’s consumer price report, which showed prices accelerated in September.

Federal Reserve Bank of Chicago president Austan Goolsbee said the data was “discouraging”, while Bank of Cleveland president Beth Hammack said the Fed might need to hike interest rates more aggressively if there was to be a notable deterioration in the public’s inflation expectations.

Traders largely expect the US central bank to hold rates steady in October, while pricing in a 90 per cent chance of a rate hike in December, going by the CME’s FedWatch Tool.

Although gold is typically seen as an inflation hedge, higher interest rates tend to reduce the appeal of the non-yielding metal.

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“Over the rest of this year, gold prices are likely to edge lower as the Fed continues raising rates and fears around the end of the (artificial intelligence) boom prove to be temporary,” said Hamad Hussain, a climate and commodities economist at Capital Economics.

Elsewhere, gold traded at a premium in India this week for the first time in more than three months, as a pullback in prices boosted jewellery purchases.

Among other metals, spot silver gained 0.3 per cent to US$57.62 per ounce, platinum rose 1.1 per cent to US$1,643.70 and palladium was up 0.4 per cent at US$1,130.75.

However, all three metals headed for weekly losses. REUTERS