Gold steadies at $4,043 after 3% slide as traders price in December Fed hike
Gold is nursing its wounds. Spot gold edged up 0.3% to $4,043.62 an ounce by 0303 GMT on Wednesday, a day after sliding nearly 3% to $4,017.21 as hotter-than-expected US inflation revived bets on a Federal Reserve rate hike next month.
The rebound is technical, not a change of mood. "We're seeing a technical retracement against Tuesday's heavy losses, as bears book profits and wait for the next catalyst. Hot CPI and hawkish Fed comments have revived tightening expectations," said Matt Simpson, senior market analyst at StoneX. US gold futures for December delivery gained 0.5% to $4,051.10.
The odds of a half-percentage-point hike in December jumped after October inflation accelerated more than expected and policymakers signalled a willingness to tighten more aggressively. Traders now see a 100% probability of a December increase, up from 84% before the data, according to CME's FedWatch tool.
Higher rates raise the opportunity cost of holding non-yielding bullion. "If we see positive developments in the Middle East that would be supportive for gold from an inflation standpoint. But overall, the near-term macro setup for gold does not seem positive," said Soni Kumari, an analyst at ANZ. Fed Vice Chair for Supervision Michelle Bowman said bringing down inflation remains the central bank's top priority, while Philadelphia Fed President Anna Paulson said more rate increases lie ahead.
Other metals fared better: spot silver climbed 1.7% to $52.38 an ounce and palladium gained 1.3% to $1,038.38.
