Softer Inflation Data Tempts Rate Hike Bets Down to 34% Gold Price Steady

The price of gold remained steady at around US$4,155 an ounce on October 1st as softer US inflation data tempered bets for a Federal Reserve rate hike. The data showed that consumer spending rose in August at its fastest pace in over a year, leading traders to pare back expectations for another rate increase.

The Fed's preferred measure of underlying inflation, the personal consumption expenditure price index excluding food and energy, rose only 0.2 per cent in August, which was less than expected. This reduction in inflation expectations led to a decrease in the probability of a rate hike from almost 70 per cent earlier in the week to around 34 per cent.

Elevated yields and lingering tightening risks leave bullion vulnerable to further selling, according to Ewa Manthey, commodity strategist at ING Bank. Gold received some support from the softer PCE reading, taking some pressure off expectations for another rate hike.