Gold Slumps on Hotter Inflation and Hawkish Fed Comments

Gold prices fell sharply to below $4,060 an ounce on Tuesday, pressured by stronger-than-expected US inflation data and hawkish remarks from Federal Reserve Governor Christopher Waller, which put a potential 50-basis-point rate hike in December into focus. US headline inflation eased to 0.4% month-on-month in October 2026, from 0.6% in September, but exceeded market expectations of 0.3%. Meanwhile, core inflation held steady at 0.3% for a third consecutive month, above forecasts of 0.2%, pointing to persistent underlying price pressures. Waller said he supports further tightening in December and would favor a half-percentage-point increase if inflation continues to accelerate. Money markets are pricing in around 28 basis points of tightening, suggesting a 25-basis-point hike is fully priced in, with some expectations of a larger increase. Rising rate expectations have weighed on gold by increasing the opportunity cost of holding the non-yielding metal.

Gold prices edged lower to around $4,120 per ounce on Tuesday, giving back part of the previous session’s gains as investors awaited a key US inflation report that could shape expectations for Federal Reserve monetary policy. Markets are now pricing in an 84% probability of a Fed rate hike in December as policymakers continue to face persistent inflationary pressures, up from roughly 74% a week earlier. Higher interest rates raise the opportunity cost of holding non-yielding assets such as gold, making the precious metal less attractive to investors. Meanwhile, bullion gained nearly 2% on Monday as oil prices plunged amid growing optimism over a potential peace agreement between the US and Iran. President Donald Trump expressed confidence that the conflict in Iran was approaching an end following discussions with Qatar’s prime minister. Lower crude prices could help ease inflationary pressures, potentially reducing the need for further monetary policy tightening.

Gold rose to $4,120 an ounce on Monday, its highest level since October 21, as falling oil prices eased inflation concerns, while investors awaited US CPI and PPI data this week for clues on the Fed’s policy outlook. The gain follows a 5% rally last week after Democrats won control of both chambers of Congress in the US midterm elections, raising hopes for an end to the US-Israeli war with Iran. Oil prices fell sharply on Monday after US President Donald Trump downplayed the likelihood of further strikes against Iran. Gold’s gains came despite a stronger-than-expected US employment report released on Friday, which reinforced expectations of higher interest rates for longer, supporting the dollar and Treasury yields. Markets currently price in an 81% probability of a Fed rate hike in December, according to CME FedWatch. Meanwhile, China’s central bank purchased 25.8 metric tons of gold in October, its largest monthly addition in three years, according to World Gold Council data.