Gold prices experienced a slight uptick in early Asian trading on Wednesday, yet they remained near a one-week low. This movement was influenced by stronger-than-anticipated US inflation data, which bolstered expectations for a Federal Reserve interest rate hike next month, thereby exerting pressure on bullion. Spot gold was up 0.2% at $4,039.07 per ounce, as of 0025, after falling nearly 3% in the previous session. US gold futures for December delivery increased by 0.4%, reaching a price of $4,046.40.
The likelihood of a half-percentage-point increase in the Federal Reserve’s interest rate next month rose significantly on Tuesday, following data that indicated US inflation accelerated beyond expectations in October. This development was further underscored by policymakers expressing a readiness to adopt a more aggressive stance on tightening monetary policy. Traders currently perceive a complete certainty of a rate increase in December, a rise from the previous 84% probability prior to the data release, as indicated by CME’s FedWatch tool.
Gold is often regarded as a safeguard against inflation; however, elevated interest rates raise the opportunity cost associated with holding non-yielding bullion, thereby diminishing its attractiveness to investors. Fed Vise Chair of Supervision Michelle Bowman emphasised on Tuesday that reducing inflation continues to be the primary focus of the central bank. However, she refrained from directly advocating for additional rate increases, suggesting instead that price pressures are expected to diminish next year as the impact of recent economic disturbances subsides.
Elsewhere, the Monetary Authority of Singapore said on Tuesday it would launch a vaulting service to hold bullion for foreign central banks and lower taxes on some companies in the gold market as it competes for a bigger slice of the precious metals trade. Among other metals, spot silver held steady at $51.52 per ounce, platinum rose 0.4% to $1,546.47, and palladium gained 0.2% to $1,027.19.
