Gold prices dipped slightly on Tuesday as investors braced for key US inflation data and remarks from Federal Reserve Chair Kevin Warsh later in the week. Spot gold fell 0.3% to $4,157.90 per ounce, while US gold futures for December settled down 0.3% at $4,177.30 per ounce.
Market strategists noted that investors are awaiting the Consumer Price Index (CPI) data on Wednesday and the Producer Price Index (PPI) figures on Thursday. Bob Haberkorn of StoneX highlighted that the Fed chair’s speech on Thursday will be closely watched ahead of the upcoming rate meeting.
Gold’s appeal tends to wane in high-interest-rate environments as it does not yield interest. Currently, traders see only a 19% chance of a Fed rate hike this month but are pricing in an 88% chance of a December increase, according to CME’s FedWatch tool.
Meanwhile, Fed Governor Christopher Waller remarked that the recent rise in US bond yields reflects stronger economic growth rather than higher inflation expectations, which remain 'well anchored.' The dollar and benchmark 10-year Treasury yields slipped from their highs but remained elevated.
The International Monetary Fund warned of risks from high public debt levels and rising bond yields, which could be further exacerbated by war-driven inflation pressures. Analysts at Commerzbank noted that interest rate hikes present a dual challenge for gold, as they increase the opportunity cost of holding non-yielding assets while also intensifying fiscal burdens.
Other precious metals also declined, with spot silver falling 1.8% to $59.25 per ounce, platinum edging 1.4% lower to $1,661.18 per ounce, and palladium dropping 1.5% to $1,126.95 per ounce.