Gold prices edge lower as US inflation data reinforces Fed outlook

Gold prices slipped in early Asian markets on Friday, following a decline of more than one percent in the previous session. Persistent US inflation fueled expectations of additional Federal Reserve (Fed) rate hikes, negatively impacting the precious metal's value. Spot gold slipped by 0.4 percent to $4,006.06 per ounce, while US gold futures for December delivery fell 0.3 percent to $4,018.50.

Despite the setback, bullion was poised for a slight weekly increase, but it remained on track for a second straight monthly decline.

US inflation surged in September as consumers faced higher prices for gasoline and other goods, bolstering economists' expectations of a Fed interest rate increase in December. Currently, traders estimate a 75 percent chance of a rate hike in December, according to the CME FedWatch Tool. Higher interest rates make holding non-yielding bullion less attractive to investors, as the opportunity cost rises.

Meanwhile, the European Central Bank (ECB) maintained interest rates during its meeting on Thursday but indicated a rate hike in December, citing energy costs as a key factor in inflation concerns.

In Japan, annual core inflation in Tokyo surpassed the central bank's two percent target by a significant margin in October, indicating heightened price pressures and reinforcing the need for further interest rate hikes. Meanwhile, the London Metal Exchange aims to convert metals stored in its Hong Kong facilities into digital assets that could serve as financing instruments.

This move aligns with the territory's five-year plan to bolster its commodities hub. Spot silver fell 1 percent to $51.87 per ounce, platinum remained steady at $1,488.00, while palladium declined 0.5 percent to $1,000.75. All three metals were heading for weekly and monthly declines.