Gold slides below $4,030 as US GDP and inflation data boost Fed tightening bets
Stronger-than-expected US third-quarter growth and a rise in September core inflation pushed spot gold below $4,030, while higher yields and a firm dollar weighed on precious metals.
Spot gold fell to about $4,026 an ounce in early US trading on Thursday, slipping roughly 1% after the release of third-quarter gross domestic product and September personal consumption expenditures (PCE) data. Silver also dropped, trading near $52.59 an ounce, down more than 2%.
The advance GDP estimate showed the economy expanding at an annualized 3.4% rate, above the 3.1% forecast and up from 2.2% in the prior quarter. Consumer spending rose 3.8% and fixed investment jumped 19.4%, driven in part by spending on artificial-intelligence-related infrastructure. The September PCE price index increased 0.5% month-over-month, its biggest gain in six months, while the annual inflation rate rose to 3.6% from 3.4% in August. Core PCE, which excludes food and energy, rose 0.3% month-over-month and 3.1% year-over-year.
"The economy remains strong and inflation stays elevated," Fed Chair Kevin Warsh said, leaving open the possibility of further tightening.
Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for a 25-basis-point hike, and interest-rate futures indicated an about 83% chance of a quarter-point increase at the Dec. 8-9 meeting. The benchmark 10-year Treasury yield hovered near the 5.0% level, raising the opportunity cost of holding non-yielding gold, while a firm dollar added to selling pressure.
Geopolitical tension in the Strait of Hormuz persisted, with US Vice President JD Vance sending a letter to Iranian security chief Mohsen Rezaei to revive nuclear talks. Although diplomatic overtures have eased immediate fears of a broader conflict, Iranian-aligned Houthi attacks on Saudi targets and threats to commercial shipping kept energy markets cautious. Crude prices slipped, with Brent near $114 a barrel and WTI around $101, but the risk of supply disruptions limited further declines.
The combination of robust US growth, resilient consumer demand and persistent inflation reinforced expectations that the Federal Reserve may resume rate hikes before year-end, a development that continued to weigh on gold and silver despite the modest easing in oil prices. Global equity futures were mixed, with US indices slipping and European markets showing modest weakness ahead of the European Central Bank’s policy decision.