Gold Extends Losses as US Inflation Data Increases Fed Rate Hike Bets

A key US inflation indicator came in higher than expected, reinforcing market bets that the Federal Reserve will raise interest rates next month, causing gold to extend its decline. Gold prices fell as much as 2.4%, dipping below $4,050 per ounce. Following the release of the October Consumer Price Index, US Treasury yields and a dollar index both climbed. The data showed that price increases accelerated, outpacing the expectations of economists surveyed by Bloomberg. The Federal Reserve's interest rate outlook is a crucial factor influencing gold's movements. Since gold itself does not pay interest, rising borrowing costs tend to put pressure on its price. The market now fully prices in a 25-basis-point rate hike in December, after Federal Reserve Governor Christopher Waller earlier on Tuesday raised the possibility of a 50-basis-point increase. Daniel Ghali, Head of Metals Research at Deutsche Bank, wrote in a report on Tuesday that Waller's remarks "started to condition market psychology" for the possibility of a 50-basis-point hike.