Gold prices down 2% on the day as US CPI rises more than expected

(Kitco News) - The gold market has been hit with significant selling pressure as persistent inflation pressures are adding to fears that the Federal Reserve could aggressively raise interest rates next month to cool rising consumer prices.

The Consumer Price Index (CPI) rose by 0.4% last month, following September’s 0.6% increase, the U. S. Bureau of Labor Statistics announced on Tuesday.

The inflation data was hotter than expected, as economists were looking for a 0.3% increase.

The report also showed that higher energy prices have become further embedded in the broader economy, as core inflation, which strips out energy and food prices, rose more than expected.

The gold market was already struggling ahead of the latest CPI data, as investors reacted to comments from Federal Reserve Governor Christopher Waller, who expressed support for a potential 50-basis-point rate hike next month while speaking at the Bank of England Watchers Conference in London.

Spot gold last traded at $4,054.90 an ounce, down 2% on the day.

Waleed Said, Technical Analyst at GivTrade, said that the latest inflation data does not bode well for gold prices through year-end.

Gold down more than 2% on the day tells you the whole story.

When the market decides tighter policy is coming, gold is the first thing to reprice and it's repricing a Fed that is going to keep pushing until inflation is heading back to 2%.”

Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, said in a note that while he expects the Federal Reserve to raise rates by only 25 basis points in December, the latest inflation data puts a January rate hike on the table.