Spot gold was down 2.8% at $4,021.36 an ounce, while U.S. gold futures for December delivery fell 1.9% to $4,036.00 an ounce.
“I think it’s a bit of a short-term negative for gold because the inflation numbers were running a little higher than expected,” said Edward Meir, an analyst at Marex.
The U.S. Consumer Price Index rose 0.4% last month after advancing 0.6% in September, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast a 0.3% month-on-month rise.
Bets on a 50-basis-point Fed rate hike in December started to build after the inflation print and comments by Fed governor Christopher Waller, who said he would support more aggressive action in the event of a too-hot Consumer Price Index report.
The probability of a 25 bp hike is fully priced in, while the possibility of a 50 bp hike rose to 10.5% from 0% before the data, according to CME’s FedWatch Tool.
The U.S. dollar rose against a basket of other major currencies, and Treasury yields climbed.
A stronger dollar makes gold more expensive for overseas buyers, while higher Treasury yields increase the opportunity cost of holding non-yielding bullion.
″(Gold) continues to trade above the critical $4,000/oz mark,” Standard Chartered said in a note, adding that “crude oil, inflation risks and equity markets continue to set the tone of trading for gold with a focus on rate hike expectations for the December Fed meeting.”
Meanwhile, the Monetary Authority of Singapore said it would launch a vaulting service to hold bullion for foreign central banks and lower taxes on some companies in the gold market as it competes for a bigger slice of the precious metals trade.
Spot silver fell 3.9% to $51.32 an ounce and palladium was down 2.0% at $1,021.22.