Gold slides to one-week low as firm dollar and Fed hike bets weigh

what happened

Gold prices fell on Thursday to a more than one-week low. Spot gold dropped 0.2% to $3,981.49 an ounce by 0310 GMT, after briefly touching its lowest level since November 4. US December gold futures slipped 0.3% to $3,987.50.

The pressure came from stronger-than-expected US inflation data and cautious comments from Federal Reserve officials. The dollar rose to a 19-month high against major currencies, making bullion more expensive for holders of other currencies. Odds of a half-point Fed rate hike next month rose sharply.

Among other metals, spot palladium gained 1% to $1,037.25 an ounce. OCBC analysts said in a note that near-term risks remain two-way, though they are not turning bearish on gold's medium-term outlook.

why it matters

Gold is usually seen as an inflation hedge, but higher interest rates raise the opportunity cost of holding a metal that pays no yield. That means expectations of tighter monetary policy can weigh on gold more than inflation supports it. Traders now look to the US producer price index report due Friday.

market impact

Gold: strong dollar and Fed hike bets pressure the metal

• ▼Gold pressure down — higher rate expectations raise the opportunity cost of a non-yielding metal
• ▲Dollar pressure up — hawkish Fed signals and bets on faster tightening support the currency

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instruments