Gold slips as higher oil, US inflation data bolster Fed hike bets

Gold prices slipped on Friday as higher oil prices and robust US inflation data strengthened the case for another Federal Reserve interest rate hike later this year.

Spot gold was down 0.5% at $4,000.54 per ounce by 0511 GMT, while US gold futures for December delivery dropped 0.5% to $4,010.10. Bullion was on track for a second consecutive monthly decline.

“Gold’s slide is asking serious questions of technical support around the $4,000 level.

Dip buying has previously limited declines, but it remains to be seen whether value buying will come to gold’s rescue,“ said Tim Waterer, chief market analyst at KCM Trade.

“There were enough bullish indicators in the US macro data this week to keep the Fed on track for a potential December hike, which combined with oil at present levels means that gold continues to lose out from an inflation perspective.”

US inflation accelerated in September as consumers paid more for gasoline and other goods, supporting economists’ expectations of an interest rate increase in December.

Higher interest rates increase the opportunity cost of holding non-yielding bullion, making gold less attractive to investors.

Traders are pricing in about a 75% chance of a rate hike in December, according to the CME’s FedWatch Tool.

Oil prices rose on Friday and were set for a fourth monthly gain, as an attack on a tanker in the Strait of Hormuz highlighted supply risks stemming from the US-Israeli war on Iran.

Elsewhere, annual core inflation in Japan’s capital well exceeded the central bank’s 2% target in October, data showed on Friday, highlighting mounting price pressure.

Spot silver slid 1.6% to $51.53 per ounce, platinum dropped 1.9% to $1,459.75 and palladium fell 1.4% to $992.37.

All three metals were headed for weekly and monthly declines.