Gold prices fell on Friday as rising oil costs and strong U.S. inflation data increased expectations of another Federal Reserve interest rate hike before the end of the year. Spot gold dropped 0.6% to $3,997.39 per ounce, while U.S. gold futures for December delivery declined 0.6% to $4,007.80. The metal was heading for its second straight monthly decline.
Analysts noted that gold's decline is testing key technical support around the $4,000 level. Tim Waterer, chief market analyst at KCM Trade, said, "Gold's slide is asking serious questions of technical support around the $4,000 level. Dip buying has previously limited declines, but it remains to be seen whether value buying will come to gold's rescue."
The latest U.S. inflation data showed accelerated price increases in September, particularly for gasoline and other goods. This data strengthened expectations of a Fed rate hike in December, with traders now pricing in a 75% chance of such a move, according to the CME's FedWatch Tool. Higher interest rates typically reduce the appeal of non-yielding assets like gold.
Oil prices also rose on Friday, supported by supply concerns following attacks on Saudi Arabia by Yemen's Iran-aligned Houthis. Meanwhile, Japan's core inflation in October exceeded the central bank's 2% target, signaling growing price pressures. Other precious metals also declined, with spot silver down 2.1%, platinum off 1.9%, and palladium falling 2%.