Gold slumps as faster US inflation stokes Fed rate hike wagers

Gold prices declined as US inflation surged, intensifying speculation about additional Federal Reserve interest rate hikes. The Consumer Price Index (CPI) increased by 0.6% month-over-month in September, and 3.7% year-over-year, driven by surging fuel costs and higher-than-anticipated underlying price pressures. Bullion plummeted nearly 2.1% to around US$4,070 per ounce, with Middle East tensions fueling concerns over further energy supply disruptions and accelerating inflation.

Silver plummeted to its lowest level since July, while platinum and palladium also fell. The US dollar surged 0.3%, and copper dropped 0.4% after the CPI release. The Federal Reserve, following its September rate increase, signaled it would carefully consider new data before acting again, with many economists expecting another hike in 2026.

The strong rise in consumer prices prompted a retreat in Treasury yields, which stabilized as increased expectations for future rate hikes dampened US equities, with the S&P 500 hitting its lowest level in over a week. Traders will closely watch September producer price data and Chairman Kevin Warsh's remarks on October 15 in Bangkok, where he will discuss economic conditions with IMF Managing Director Kristalina Georgieva.

Gold is approaching key support near US$4,000, a level that previously facilitated a rally when US inflation and job data were relatively subdued, according to TD Securities' global head of commodity strategy, Bart Melek. Any additional disruptions to Middle East oil supplies could further fuel inflation, potentially pushing gold prices down below US$3,900.