Gold rose more than 1% on Thursday, rebounding from a one-week low hit in the previous session as the US dollar eased, while investors assessed the likelihood of a Federal Reserve interest rate increase this month after a hot inflation report.
Spot gold was up 1.3% at $4,158.63 per ounce, as of 0257 GMT, after hitting its lowest since October 7 on Wednesday. US gold futures for December delivery rose 1.8% to $4,180.00 per ounce.
The dollar slipped after scaling an 18-month peak overnight. A softer dollar makes greenback-priced bullion more affordable for buyers overseas.
“What we’re seeing here is just the symptoms of a market uncertain about US interest rate policy, and that is resulting in a bit of volatility,” said Kyle Rodda
“We’re coming up to a really critical level for gold, which is just below the $4,000 level. If we see, again, some really strong data, then there’s a view that the Fed will have to hike relatively urgently, then that will be the level of focus.”
US consumer prices accelerated in September as the cost of gasoline surged. Traders are pricing in about a 27% chance of a rate hike later this month, compared with 22% before the data, according to CME’s FedWatch Tool.
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San Francisco Fed President Mary Daly said the US central bank will probably need to increase short-term interest rates further, though she signalled no need for a hike at the October 27-28 meeting. Vice Chair for Supervision Michelle Bowman said there’s time to wait and see before any more action.
Although gold is viewed as an inflation hedge, higher interest rates reduce its appeal because it does not pay interest.
Market focus now turns to the Producer Price Index (PPI) and retail sales data due at 1230 GMT.
Among other metals, spot silver gained 1.1% to $56.26 per ounce, platinum rose 0.3% to $1,611.15 and palladium climbed 1.3% to $1,107.83.