October Rate Hike Bets Tumble as Gold Prices Rise

Gold prices have edged higher on Thursday after softer-than-expected US inflation data reduced expectations of a Federal Reserve interest rate hike in October. Spot gold rose 0.5% to USD 4,175.19 an ounce by 0417 GMT, while US gold futures for December delivery gained 0.4% to USD 4,204.80.

The move comes at the start of October after gold fell more than 6% in September. Softer inflation eased Fed rate hike expectations, with markets now pricing in a 38% chance of an October rate hike, down from 45% before the inflation data.

Expectations of a December rate increase remained elevated, however, with traders pricing in a 97% probability, according to Reuters. Gold typically benefits when expectations for higher interest rates decline as the opportunity cost of holding the non-yielding asset falls.

Market attention is now turning to the US nonfarm payrolls report for September, scheduled for release on Friday. The data could provide further direction on the Federal Reserve's interest-rate path and, consequently, on gold prices.