Gold Holds Above $4,000 After Hot US Inflation and Hawkish Fed Remarks

SINGAPORE – Gold held above $4,000 an ounce after a hotter-than-expected US inflation report and hawkish comments from Federal Reserve officials strengthened bets on an interest-rate increase in December.

Why the metal is under pressure

Gold maintained its losses after the US consumer price index for October came out hotter than expected on Tuesday, Bloomberg reported, sending Treasury yields and a gauge of the dollar higher. Those moves had settled by Wednesday, but traders were fully pricing in a quarter-point rate rise at the Fed’s December meeting.

Higher borrowing costs weigh on gold because it pays no interest, and a stronger dollar makes the metal more expensive for most buyers. Even so, prices have stayed above the $4,000-an-ounce level, which Bloomberg said suggested support from haven demand. Central-bank buying also remains intact, the report said, even as tighter policy clouds the near-term outlook.

Suki Cooper, global head of commodities research at Standard Chartered, wrote that “prices have held up well despite the equity market correction as gold appears to be shifting away from its role as a liquidity provider.”

What Fed officials said

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, called the October consumer-price report “borderline disturbing.” “We’ve got a real inflation issue on our hands that has been developing and we’re going to have to deal with that,” he said.

Lorie Logan, president of the Dallas Fed, said she still sees a need for at least two quarter-point increases, and that the pace of those hikes may need to be quicker than the Fed has been this autumn. Fed Governor Christopher Waller had earlier floated the possibility of a half-point increase in December.

At 9:31 a.m. in Singapore, gold was up 0.1% at $4,038.55 an ounce. Silver rose 1% to $52.06 after falling 3.5% in the earlier session. Platinum and palladium were slightly higher, and the Bloomberg Dollar Spot Index was marginally lower.

The $4,000 hold will be watched by gold producers, including those in South Africa, but the Bloomberg report did not give moves in the rand or on the Johannesburg Stock Exchange.

Sources

• Moneyweb / Bloomberg: Gold holds loss near $4,000 on hot US inflation, Fed remarks