Gold fell over 1 percent on Wednesday, extending losses for a third straight session, as a stronger-than-expected inflation reading increased US Federal Reserve rate hike bets for this month.
Spot gold dropped 1.6 percent to USD4,091.06 per ounce by 11:30 a.m. EDT (1530 GMT), its lowest since October 7. US gold futures for December delivery fell 1.5 percent to USD4,112.90 per ounce.
The US dollar index climbed 0.7 percent, making greenback-denominated gold more expensive for holders of other currencies, while 10-year US Treasury yields also rose.
“At this point it portends that the Fed is more likely to raise interest rates,” David Meger, director of metals trading at High Ridge Futures, said, citing hotter-than-expected consumer price index (CPI) data that has remained above Fed targets.
“As a result, we’ve seen the dollar rise and pressure added to the gold market.”
The CPI rose 0.6 percent last month after climbing 0.4 percent in August, the Labor Department’s Bureau of Labor Statistics said on Wednesday.
Markets see about a 42 percent chance of a US rate hike this month, up from about 22 percent before the inflation data, and are pricing in a 93 percent probability of an increase in December, according to CME’s FedWatch Tool.
While gold is typically seen as a hedge against inflation, higher interest rates tend to diminish the appeal of non-yielding bullion.
Fed Vice Chair for Supervision Michelle Bowman said the central bank has time to wait and see how financial markets and the economy evolve after its September rate rise before deciding whether to take any more action.
Oil prices rose on Wednesday after an attack on the headquarters of Saudi Arabia’s state-owned oil company, while Iranian officials told Reuters they were deploying new tactics to target ships, seeking to keep oil prices high and influence US midterm elections.
“In the longer term, gold should again benefit from continued strong central-bank buying and renewed concerns over US debt and its rising interest burden,” said Julius Baer analyst Carsten Menke.
Among other metals, spot silver fell 5.6 percent to USD56.13 per ounce, platinum dipped 3.3 percent to USD1,609.19 per ounce and palladium fell 2.3 percent to USD1,100.22 per ounce.
