Gold falls as hot inflation figures, higher dollar weigh

Gold prices dropped by 1.1% to US$3,986.79 per ounce, following a 3% decline on Tuesday, after soaring to a peak of US$4,066.77 earlier in the trading session. US gold futures for December delivery declined by 0.7% to US$4,000.50 per ounce. The Consumer Price Index (CPI) exceeded expectations, prompting market analysts to anticipate higher interest rates at the upcoming December meeting.

Bob Haberkorn, senior market strategist at StoneX, explained that the data suggested a need for a rate increase at the December meeting. Gold experienced a 3% drop on Tuesday following news that US consumer prices increased by a larger-than-expected 0.4% in October. Economists surveyed by Reuters had predicted a 0.3% rise. Prior to the release, Federal Reserve Governor Christopher Waller suggested that a core inflation reading of 0.3% in October would lead him to consider a half-point rate hike during the December meeting.

While markets had priced in an 87% probability of a 25-basis-point rate hike in December, bets on a 50 basis point increase surged to 12.9% from zero following the CPI reading, pushing the dollar index to its highest level since April 2025. A stronger dollar makes bullion more costly for international buyers, and the non-yielding metal becomes less appealing in a high-interest-rate environment.

Haberkorn noted that strong purchases by major consumers like China and other central banks have supported gold prices despite the fundamental challenges posed by the Fed and interest rates. Palladium prices increased by 1.8% to US$1,043.00 per ounce, while silver rose by 0.7% to US$51.88 per ounce.