Gold slides to $4,050 as hotter US CPI fuels rate-hike bets
Gold fell about 2.2% to around $4,050 after US consumer price data came in above forecasts, strengthening the dollar and raising expectations of a Federal Reserve rate increase in December.
Gold (XAU/USD) continued its intraday decline on Tuesday, slipping to roughly $4,050, a drop of about 2.2% that erased the gains made the previous day. The move followed the release of US Consumer Price Index (CPI) data that showed a 0.4% month-over-month increase in October, above the 0.3% forecast, while core CPI rose 0.3%, also exceeding expectations. The stronger inflation reading lifted the US Dollar Index above 102.00, adding pressure to the non-yielding metal.
Fed Governor Christopher Waller said he would “still support a 25 basis point increase” in December and warned that a “half-point Fed rate hike may be needed in December” if core CPI remains around 0.3% or higher. Market participants now price an 85.3% probability of a 25-basis-point hike and a 14.7% chance of a 50-basis-point move, according to the CME FedWatch Tool. A Reuters poll of 101 economists found unanimous expectation of a 25-basis-point increase in December, with 56 viewing it as the final hike of the cycle.
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The decline in gold is also linked to falling oil prices; West Texas Intermediate slipped toward $84 a barrel, its lowest level since the end of August, which could ease inflation pressures and reduce the need for further tightening. Technical analysis shows the metal holding below the 20-day Bollinger moving average near $4,060, with immediate support at the $4,000 psychological level and resistance around $4,400.