WASHINGTON – Gold slumped after US consumer prices jumped the most in five months, reigniting worries that the Federal Reserve will need to raise interest rates further to combat inflation.
The consumer price index (CPI) rose 0.6% in September from a month earlier, according to Bureau of Labor Statistics data out on Oct 14, and climbed 3.7% from a year earlier. The move was driven by rising fuel costs, while a gauge of underlying price pressures also rose more than expected.
Bullion slumped as much as 2.1% near US$4,070 an ounce, with a flare-up in attacks in the Middle East also stoking worries that further disruptions to regional energy supplies will accelerate inflation and add to the case for higher borrowing costs, a headwind for non-yielding gold.
Silver plummeted to the lowest level since July 20. Platinum and palladium also slumped, while the dollar rallied 0.3%.
Copper dropped 0.4% on the London Metal Exchange after the CPI print, with the rallying dollar and the prospect of higher borrowing costs dimming the outlook for the key industrial metal. It settled down 0.6%.
The Fed in September responded to renewed price pressures by raising interest rates for the first time since 2023.
Since then, top officials have signalled they have time to weigh incoming data before acting again, though the median official expects one more increase in 2026, according to their latest projections.
The broad upswing in consumer prices had earlier triggered a rout in Treasuries.
The selloff stalled as an increase in expectations for future Fed rate hikes sparked declines for US equity benchmarks, sending the S&P 500 Index to its lowest level in more than a week.
Looking ahead, traders will be watching September US producer prices data, while also monitoring Fed’s Chairman Kevin Warsh remarks late on Oct 15 New York time in Bangkok, where he is scheduled to appear in a fireside chat with International Monetary Fund Managing Director Kristalina Georgieva.
Gold is nearing key support around US$4,000 an ounce, a level that held in September before softer US inflation and jobs data fuelled a rally, Bart Melek, global head of commodity strategy at TD Securities said in a note.
Further disruptions to Middle East oil supplies stemming from the Iran war, however, could fuel inflation.
“This would no doubt drive rate expectations sharply higher, representing a downside risk for gold. As such, prices could drift materially below US$3,900 per ounce,” he added. BLOOMBERG
