Gold Erases Gains on Strong Dollar

Gold erased its early gains to fall towards $4,030 an ounce on Wednesday, as the US dollar climbed to its highest level since April 2025, supported by hotter-than-expected inflation data and hawkish Federal Reserve comments. A modest rebound in oil prices following their recent decline to 10-week lows also added to inflationary concerns. US consumer prices rose 0.4% in October, above expectations of 0.3%, prompting traders to raise the probability of a December Fed rate hike to 100%, from 84% before the release, according to the CME FedWatch Tool. Expectations of a larger, 50-basis-point increase also gained traction. Meanwhile, Fed Governor Christopher Waller suggested that persistent core inflation could warrant a half-point hike as early as December, while other policymakers, including Anna Paulson and Michelle Bowman, maintained a hawkish tone, reinforcing expectations of further monetary tightening and adding pressure on non-yielding gold.

Gold rose above $4,050 an ounce on Wednesday, recouping some losses from the previous session when hawkish comments from Federal Reserve officials and stronger-than-expected US inflation data strengthened expectations of a rate hike in December. US headline inflation slowed to 0.4% MoM in October from 0.6% in September, but came in above market forecasts of 0.3%. Meanwhile, core inflation remained unchanged at 0.3% for the third consecutive month, exceeding expectations of 0.2% and signaling persistent underlying price pressures. Fed Governor Christopher Waller expressed support for further monetary tightening in December, adding that he would favor a half-percentage-point increase if inflation continues to accelerate. Dallas Fed President Lorie Logan also indicated that more aggressive rate hikes may be necessary to bring inflation under control. Consequently, markets are now pricing in approximately a 91% probability of a rate increase next month, up from 84% in the previous session.

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.