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Gold prices fell sharply in global markets on Thursday as expectations of a possible US interest rate hike strengthened amid concerns over inflation.
Investors are awaiting fresh US inflation data that could provide clues about the Federal Reserve’s next monetary policy decision.
Spot gold fell 1.1% to $4,022.19 per ounce at around 3pm Bangladesh time on Thursday. US gold futures for December delivery dropped 0.4% to $4,035 an ounce. The precious metal is on track for a second consecutive monthly decline.
The Federal Reserve kept interest rates unchanged on Wednesday, as expected.
However, policymakers have postponed any adjustment to borrowing costs while awaiting further inflation data and assessing economic conditions following next week’s US midterm elections. This has strengthened expectations of a possible rate hike in December.
The US Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, was scheduled for release at 6:30pm Bangladesh time on Thursday.
Han Tan, chief market analyst at Bybit, said gold could fall below $4,000 an ounce again if the PCE figures exceed market expectations, further strengthening the case for a December rate hike.
According to CME’s FedWatch tool, traders are pricing in an approximately 80% chance of a US rate hike in December.
Higher interest rates tend to weigh on gold prices because the non-yielding asset becomes less attractive compared with interest-bearing investments.
Meanwhile, market analysts expect the European Central Bank to keep interest rates unchanged on Thursday. However, volatility in France’s bond market could draw greater attention than the bank’s policy decision.
Tan also warned that geopolitical tensions could rise again after the US midterm elections. If oil prices reach $120 a barrel or higher, inflationary pressures could intensify, potentially prompting tighter monetary policy and pushing gold to a new low for the year.
Meanwhile, global oil prices fell on Thursday amid renewed hopes for peace talks after US Vice President JD Vance reportedly sent a letter to Mohsen Rezaei, head of Iran’s National Security Council, seeking to revive diplomatic efforts.
Other precious metals also declined. Spot silver fell 2.4% to $52.67 an ounce, platinum dropped 2.3% to $1,502.61, and palladium slipped 0.8% to $1,002.55 an ounce.
