Gold heads for a weekly loss as traders weigh the chance of another Fed rate rise
Gold was set for a weekly decline on Friday's pricing reported this weekend, with spot gold at $4,175.34 an ounce, down 0.4% on the week, as hotter-than-expected US inflation lifted expectations of further Federal Reserve tightening. Traders largely expect a hold this month, with futures pricing pointing to December.
Gold was heading for a weekly loss as investors tried to make sense of the Federal Reserve's next move. In the Reuters report published this weekend, spot gold was up slightly on the day at $4,175.34 per ounce but down 0.4% over the week, while US gold futures for December delivery rose to $4,198.20. One TD Securities strategist described the market as range-bound but tilting towards the lower end of its support, mainly because there is still so much ambiguity about what the Fed will do.
The ambiguity comes from inflation. US producer prices rose by the most in four and a half years last month, following a consumer price report that showed prices accelerating in September. Chicago Fed President Austan Goolsbee called the data discouraging, while Cleveland Fed President Beth Hammack said the central bank might need to raise rates more aggressively if public inflation expectations deteriorated noticeably.
Traders, for now, largely expect the Fed to hold rates steady this month, with the CME FedWatch tool pointing to a high probability of a hike in December instead. Fed Chair Kevin Warsh voiced optimism about the strength of the US economy but gave no clear clue about the path of rates, leaving both the hold and the hike scenarios alive at the same time.
The mechanics matter for gold. The metal is often treated as a hedge against inflation, but it pays no interest, so higher rates tend to reduce its appeal compared with assets that yield something. That is why a hotter inflation print can push gold in two directions at once — and why, in this reading, the rate effect appeared to be winning the week. Silver, platinum and palladium were also all heading for weekly losses, even though each was up modestly on the day.
Elsewhere in the same report, gold traded at a premium in India this week for the first time in more than three months, as a pullback in prices encouraged jewellery buying. For European readers, the takeaway is narrower: gold's next move depends less on fear of inflation itself than on whether the Fed decides inflation now requires still higher rates.
Source: Reuters (via Business Recorder)