Gold Hits Three-Month Low Amid Rising Expectations of US Rate Hike

Gold prices fell on Friday to their lowest level since mid-July, poised to record losses for a second consecutive month, as rising crude oil prices and persistent inflation concerns bolstered expectations for further U.S. interest rate hikes.

By 09:04 GMT, spot gold prices fell 0.6 percent to $3,995.42 per ounce, after earlier hitting their lowest level since July 17. U.S. December gold futures dropped 0.6 percent to $4,005.50. The precious metal has declined 3.8 percent since the beginning of the month.

Giovanni Stonovo, an analyst at UBS, said, “Gold prices are influenced by a combination of two factors: stronger-than-expected U.S. GDP data and rising oil prices, which are pressuring the Federal Reserve (the U.S. central bank) to raise interest rates further.”

Data released on Thursday showed that U.S. GDP grew more than expected in the previous quarter, while inflation accelerated in September as consumers paid more for gasoline and other goods, reinforcing economists’ expectations of a rate hike in December.

According to the CME’s FedWatch tool, traders are pricing in a nearly 74 percent probability that the U.S. central bank will raise interest rates in December.

Stonovo added, “Gold could rise to $5,000 or more next year, as the Federal Reserve will eventually need to cut interest rates again, and inflation will not be a problem by then.”

Major central banks refrained from raising interest rates this week but clarified that the tightening cycle is not yet over.

Both the Federal Reserve and the European Central Bank kept interest rates unchanged, citing inflation risks stemming from rising energy costs.

In other precious metals, spot silver fell 2.8 percent to $50.9221 per ounce, platinum dropped 3.1 percent to $1,441.72, and palladium declined 2.1 percent to $984.50. All three metals are on track for weekly and monthly losses.