Gold Closes at $3,990.335 as Markets Await December US Rate Hike
Key Facts
Spot gold closed at $3,990.335 an ounce on October 30, down from $4,020.565 the previous day, according to EL7 data. The close was below $4,000 as rising inflation strengthened investor bets on tighter US monetary policy at the next meeting. The Associated Press reported that investors see a probability of about 85% of a rate hike then, while most economists expect another quarter-percentage-point increase. The Federal Reserve had kept its target rate range between 3.75% and 4% at its October 28 meeting. The possibility of a December hike therefore reflects market expectations, not a decision made by the central bank.
The Bureau of Labor Statistics report showed that the Consumer Price Index rose 0.6% in September from a month earlier, after a 0.4% increase in August, while it was up 3.7% in the 12 months through September. But the increase was concentrated largely in energy: the gasoline index rose 9.1%, accounting for more than half of the monthly increase in the overall index, while the energy index rose 5.2%. By contrast, the core price index, which excludes food and energy, increased 0.3% month over month in September, the same monthly rate recorded in each of the two months, according to the draft correction. The core index rose 2.6% over 12 months. The figures put the jump in the headline index in the context of higher fuel prices, while monthly core price growth remained at 0.3%.
Price pressures extended to another inflation measure: the Associated Press reported that the personal consumption expenditures price index rose 3.6% year over year in September, compared with 3.4% in August, and increased 0.5% month over month. A report published by the agency on October 30 said the monthly increase was the largest since March. The agency also reported that oil prices topped $100 a barrel amid renewed violence in the Middle East, after being below $70 before the Iran war. The rise in oil puts energy costs among the factors accompanying the inflation data, after gasoline accounted for more than half of the monthly increase in the headline Consumer Price Index. In a separate report on gold, Investing.com said the metal lost more than 3% during October, alongside a rise in the personal consumption expenditures price index.
At its October 28 meeting, the Fed voted 10 to 2 to keep its rate range between 3.75% and 4%. The two dissenting members voted to raise the range by a quarter of a percentage point, marking a split within the committee over the decision. The central bank said in its statement: "Inflation remains elevated," adding that the accumulation of more information would help the committee determine the appropriate stance of monetary policy. This comes as investors see a probability of about 85% of a rate increase at the next meeting, according to the Associated Press, while most economists expect a quarter-point increase. Those expectations remain subject to data released before the meeting, and the Fed did not announce a December decision in its October statement.
Against the backdrop of the broader economic picture, the US economy grew at an annual rate of 3.4% in the quarter from July to September, compared with 2.2% in the previous quarter, according to the Associated Press. At the same time, the saving rate fell to 3.8% in September, its lowest level in four years, the agency said. These indicators combine faster economic growth than in the previous quarter with saving at its lowest level in four years, alongside the price pressures reflected in the consumer price and personal consumption expenditures indexes. The inflation and spending report adds to the data the Fed said would help the committee determine its monetary policy stance. The statement did not specify whether these indicators would lead to a rate change at the next meeting.
Markets are awaiting the Federal Open Market Committee's next move at its meeting scheduled for December 8 and 9, 2026. Before then, the US Consumer Price Index for October is scheduled for release on November 10 at 8:30 a.m. Eastern time, according to the Bureau of Labor Statistics. The data will follow September's reading, which showed a 0.6% monthly increase in the headline index and a 0.3% rise in the core index. The inflation outlook will be assessed alongside the market estimates reported by the Associated Press, which put the probability of a rate hike at the next meeting at about 85%. EL7's latest gold close was $3,990.335 an ounce on October 30, after $4,020.565 on October 29.