NEW YORK: Gold prices climbed on Wednesday, but stayed near the USD4,000 level after a sharp sell-off in the previous session driven by hot US inflation data and hawkish policymakers’ comments that boosted bets on further and larger rate hikes.
Spot gold rose 0.3 percent to USD4,042.71 per ounce by 1243 GMT after dropping around 3percent to USD4,013.29 on Tuesday. US gold futures for December delivery was up 0.51 percent at USD4,050.70 per ounce.
“Gold is seeing some slight relief after its post-CPI declines,” said Han Tan, chief market analyst at Bybit. “However, it’s a tough ask for gold bulls to keep pushing prices higher given the prospects of more Fed rate hikes in the pipeline.”
Data released on Tuesday showed US consumer prices rose more than expected in October, with the CPI increasing 0.4 percent.
Economists polled by Reuters had forecast a 0.3 percent rise. Traders raised the odds of a December Federal Reserve rate hike to 100 percent, as per CME’s FedWatch tool.
Expectations of a larger, half-percentage-point hike also increased. Ahead of the data, Fed Governor Christopher Waller said a core inflation reading of 0.3 percent in October would prompt him to consider a half-point hike at the December meeting.
Other policymakers also maintained a hawkish tone, with Fed Bank of Philadelphia President Anna Paulson signalling further US rate hikes and Fed vice chair for supervision Michelle Bowman reaffirming the central bank’s focus on curbing price pressures.
Although gold is typically seen as an inflation hedge, higher interest rates diminish its appeal, as gold bullion pays no interest.
Among other metals, spot palladium gained 5.2 percent to USD1,078.56 per ounce, having hit its highest level since October 22.
“Palladium’s sharp rebound appears primarily driven by short covering and position adjustments following an increasingly oversold market,” said Ole Hansen, head of commodity strategy at Saxo Bank.
“For now, I believe positioning rather than any fundamental shift in supply and demand is doing most of the heavy lifting,” Hansen added. Spot silver climbed 2.5 percent to USD52.8116 per ounce.