Gold prices saw a slight rebound on Friday after the latest US inflation data came in as expected, easing some concerns about aggressive rate hikes. Spot gold rose 0.1% to $3,879.71 per ounce, though it remained on track for its worst weekly performance since early June, down about 4.5%. The US Producer Price Index (PPI) for final demand increased 0.3% last month, slightly below the forecasted 0.4% rise.
The market had been bracing for a larger rate hike, but the PPI data reduced those expectations slightly. Independent analyst Tai Wong noted that gold struggled to hold initial gains as bond markets faced challenges due to persistent Fed hawkishness. Despite the PPI not surpassing expectations, the core figure of 0.3% month-on-month remained a concern for policymakers.
Gold had plummeted 3% on Thursday, hitting its lowest level in over a year, driven by rising oil prices and fears of prolonged high interest rates. The decline was exacerbated by earlier hotter-than-expected Consumer Price Index data. Wong added that gold may continue to struggle to regain the $4,000 mark with the Federal Reserve maintaining a hawkish stance.
Markets now see a 91.4% chance of a 25-basis-point rate hike in December, down from 96.2% before the PPI data. The probability of a larger 50-basis-point move has also decreased to 8.6% from 13.8%. Higher interest rates typically reduce the appeal of non-yielding assets like gold.
Other precious metals also faced declines. Spot silver fell 1.9% to $49.05 per ounce, platinum dropped 1.9% to $1,490.06, while palladium managed a 1.1% gain to $1,004.40. All three metals were set to end the week with losses.