Gold Slides Below $4,100 as US Inflation Revives Fed Rate Hike Expectations

By Staff, Agencies

Gold prices dropped below $4,100 per ounce on Wednesday, reaching their lowest level since early August, as stronger-than-expected US inflation data fueled expectations of further interest rate increases by the Federal Reserve.

Spot gold fell 1.61% to $4,094.57 per ounce as of 1310 GMT. Silver prices also came under pressure, declining 3.9% to $59.80 per ounce.

The decline followed the release of US inflation figures showing that annual consumer price growth accelerated to 3.7% in September, exceeding market expectations of 3.6%. Rising energy prices were identified as a major factor behind the increase.

On a monthly basis, consumer prices rose 0.6%, marking their largest increase in five months. Core inflation, which excludes food and energy prices, also came in above expectations, reaching 2.6% annually and 0.3% month-on-month.

The stronger inflation readings prompted investors to reconsider the Federal Reserve’s monetary policy outlook, putting additional pressure on precious metals. Gold and silver, which do not generate interest income, generally become less attractive to investors when higher interest rates increase the appeal of interest-bearing assets.

Market expectations for the Fed’s October meeting shifted significantly following the report. The probability that policymakers would leave interest rates unchanged fell to around 50%, compared with more than 78% before the inflation figures were released.

Meanwhile, expectations of a rate increase in December climbed to nearly 99%, up from 88% previously.

Although recent communications from the Federal Reserve had provided little indication that consecutive interest rate increases were likely, the stronger-than-expected core inflation figures have brought the possibility of another near-term hike back into focus.

The latest market movements reflect growing concerns that persistent inflation could force the Federal Reserve to maintain a tighter monetary policy, potentially extending pressure on precious metals in the coming weeks.