Gold Gains Nearly 1%

Gold prices rose to around $4,150 an ounce on Thursday, supported by a broader flight to safety amid a global equity sell-off and rising inflation expectations. The tech rout, driven by concerns over the sustainability of AI spending in a high-interest-rate environment, added to market uncertainty. Meanwhile, US producer price data reinforced signs of mounting inflationary pressures, echoing Wednesday’s CPI report and strengthening expectations that the Fed will keep interest rates elevated for longer, putting further strain on heavily indebted borrowers. A weaker US dollar and ongoing geopolitical tensions in the Middle East and Ukraine provided additional support for the precious metal.

Gold climbed toward $4,150 per ounce on Thursday, recovering from the previous session’s losses as crude oil ended its five-day rally, easing pressure across other markets. A softer dollar and retreating bond yields also provided support to metals. However, expectations of more aggressive Federal Reserve rate hikes continued to weigh on sentiment following hotter-than-expected US inflation data. The US Consumer Price Index rose to 3.7% in September, its highest level in four months and above market forecasts of 3.6%, largely driven by rising energy costs. Federal Reserve Bank of Chicago President Austan Goolsbee described the figures as “discouraging” and cautioned that the rapid expansion of artificial intelligence infrastructure could also be overheating the economy. Meanwhile, San Francisco Fed President Mary Daly indicated that the central bank may need to raise short-term interest rates further, although she saw no immediate need for a rate hike at this month’s meeting.

Gold prices fell below $4,100 an ounce on Wednesday, hitting their lowest level since early August, as a stronger-than-expected US inflation report prompted markets to reassess the Federal Reserve’s rate outlook. US inflation rose to 3.7% year-on-year in September, above forecasts of 3.6%, driven by higher energy prices. Monthly CPI increased 0.6%, its biggest gain in five months, while core inflation also exceeded expectations, reaching 2.6% annually and 0.3% monthly. According to LSEG data, markets now see around a 50% chance of the Fed holding rates steady at its October meeting, down from more than 78% before the report. Meanwhile, the probability of a rate hike in December has risen to nearly 99%, from 88% previously. Although recent Fed communications had offered little indication of a back-to-back rate hike in October, the larger-than-expected increase in core CPI has brought that possibility back into focus, adding further pressure on non-yielding gold.