Gold Slides as Dollar Strength and Fed Rate Bets Weigh

Gold prices dropped more than 2.5% to around $3,870 an ounce on Thursday, retreating to levels not seen in months, pressured by a stronger US dollar, expectations of further monetary tightening by the Federal Reserve and rising oil prices. Stronger-than-expected US consumer inflation data for October, released on Tuesday, boosted the dollar to a 19-month high as traders increased bets on further Fed rate hikes. Meanwhile, renewed oil price gains added to inflation concerns after President Donald Trump said the US did not need a deal with Iran and redirected Vice President JD Vance towards domestic priorities, away from negotiations with Tehran. According to CME’s FedWatch Tool, markets are pricing in nearly a 90% chance of a 25-basis-point rate hike in December, while the probability of a larger 50-basis-point increase has risen to around 10%, from zero before the inflation data.

Gold weakened below $4,000 an ounce on Thursday, sliding for the third straight session as a stronger US dollar weighed on the precious metal. The dollar gained support from hotter-than-expected US inflation figures and increasingly hawkish comments from Federal Reserve officials, reinforcing expectations of further interest rate increases. Fed Governor Christopher Waller indicated that a 50-basis-point hike in December may be necessary, while Dallas Fed President Lorie Logan supported at least two additional 25-basis-point increases to address persistent inflationary pressures. Markets are currently pricing in approximately a 91% probability of a rate hike next month, with further increases in January and potentially April also being factored in. Investors are now turning their attention to upcoming US economic releases, including weekly jobless claims, existing home sales and producer inflation data, for further indications of the Fed’s monetary policy outlook.

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.