Gold prices dropped nearly 3% on Tuesday after the latest US inflation data came in higher than expected. The stronger-than-anticipated Consumer Price Index (CPI) report boosted the dollar and Treasury yields, creating headwinds for the non-yielding asset. Spot gold fell 2.7% to $4,028.39 per ounce, while US gold futures for December delivery settled 2.0% lower at $4,030.20 per ounce.
Analyst Edward Meir of Marex described the inflation data as a short-term negative for gold, as it reinforced expectations of a more aggressive interest rate hike by the Federal Reserve. The probability of a 50-basis-point rate hike in December rose to 10%, up from 0% before the data, according to CME's FedWatch Tool. A stronger dollar and higher yields increase the opportunity cost of holding gold.
Despite the decline, gold remains above the critical $4,000 per ounce mark, according to Standard Chartered. The bank noted that crude oil prices, inflation risks, and equity markets continue to influence gold trading, with a focus on the Fed's December meeting. Meanwhile, the Monetary Authority of Singapore announced plans to launch a vaulting service for foreign central banks and lower taxes on some gold market companies to attract more trade.
Other precious metals also saw declines. Spot silver fell 3.95% to $51.30 per ounce, palladium dropped 1.2% to $1,028.83, and platinum fell 2.7% to $1,534.38.