Gold Prices Drop Below $4,000 Amid Strong Dollar and Fed Rate Hike Expectations

Spot gold prices declined in late U.S. trading, falling below $4,000 an ounce, while spot silver prices saw a modest increase. The drop in gold prices was attributed to a stronger U.S. dollar and heightened expectations for additional interest rate hikes by the Federal Reserve after a recent inflation report exceeded forecasts. Gold was trading around $3,983.20 an ounce, down 1.21%, while silver rose approximately 0.29% to $51.560.

The U.S. consumer price index revealed a 0.4% increase in headline inflation for October, surpassing the anticipated 0.3% rise, with core prices also higher than expected. This inflation surprise followed a robust employment report indicating 165,000 new jobs added in October and a drop in unemployment to 4.1%. These factors have intensified expectations for further tightening by the Federal Reserve, with futures markets indicating an 87.1% probability of a 25-basis-point increase at the upcoming December meeting.

The U.S. dollar index rose approximately 0.7% to around 102.90, nearing its highest level since April 2025, which added further pressure on gold prices. Meanwhile, crude oil prices increased as geopolitical tensions in the Strait of Hormuz continued, with Brent crude futures settling at $92.76 a barrel.

North American equity markets experienced gains, with the Dow Jones Industrial Average rising about 0.5% and the S&P 500 increasing by 1.3%. Canadian markets also saw positive movement, with the S&P/TSX Composite Index advancing 0.67%. European markets closed higher, supported by technology shares and strong corporate earnings, with the pan-European Stoxx 600 up 0.72%.

Looking ahead, upcoming economic indicators, including weekly jobless claims and the October producer price index, will further influence market expectations regarding Federal Reserve policy and inflation trends.