Gold prices saw a modest rebound on Wednesday, recovering from a sharp 3% drop in the previous session. However, gains were capped as stronger-than-expected U.S. inflation data reinforced expectations of a Federal Reserve interest rate hike next month, dampening demand for the non-yielding asset.
Spot gold rose 0.3% to $4,043.62 per ounce by 0303 GMT, while U.S. gold futures for December delivery climbed 0.5% to $4,051.10. Analysts attributed the uptick to a technical retracement following Tuesday's steep decline, with traders booking profits and awaiting further catalysts.
The odds of a half-percentage-point Fed rate hike in December surged to 100% after data showed U.S. inflation accelerated more than anticipated in October. Policymakers, including Fed Vice Chair Michelle Bowman and Philadelphia Fed President Anna Paulson, emphasized the central bank's commitment to tightening policy to combat inflation.
Other precious metals also saw gains, with spot silver climbing 1.7% to $52.38 per ounce and palladium rising 1.3% to $1,038.38. Despite gold's typical role as an inflation hedge, higher interest rates increase its opportunity cost, reducing its appeal to investors.