Gold subdued as yields, dollar rise after US inflation data

By Ashitha Shivaprasad

(Reuters) – Gold prices eased on Thursday as dollar and Treasury yields ticked higher after U.S. consumer prices rose more than expected in September and raised worries that the Federal Reserve could keep rates higher for some time.

Spot gold fell 0.3% to $1,868.79 per ounce by 3:04 p.m. ET (1904 GMT), after hitting its highest level since Sept. 27 earlier in the session. U.S. gold futures settled 0.2% lower at $1,883.

The consumer price index increased 0.4% last month after a 0.3% gain in August, the Labour Department said. However, year-on-year consumer prices have come down from a peak of 9.1% in June 2022.

“The warm CPI print might be enough to slow gold’s formidable rally into a consolidation but in itself shouldn’t trigger a serious selloff, especially given high geopolitical tensions,” said Tai Wong, a New York-based independent metals trader.

Traders now see a 38% probability of a rate hike in December from the Fed, according to CME Fedwatch tool, compared with about a 28% chance seen before the report.

U.S. benchmark 10-year yields and dollar index rose after the data. [USD/] [US/].

Offering support to safe-haven gold, the escalating conflict between Israel and Palestinian militant Islamist group Hamas has kept investors on the edge.

Gold is used as a safe investment during times of political and financial uncertainty, but higher interest rates raise the opportunity cost of holding non-yielding bullion.

“There are still some signs that there is a slowdown in the U.S. economy, this should benefit gold. I anticipate prices could trade in the $1,860-$1,920 range in the near term,” said Edward Moya, senior market analyst at OANDA.

Elsewhere, spot silver lost 1.2% to $21.79 per ounce, platinum fell 2.2% to $865.87, while palladium dipped 2.9% to $1,132.75.

(Reporting by Ashitha Shivaprasad in Bengaluru, editing by Deborah Kyvrikosaios and Shilpi Majumdar)