Gold edges up to $4,050 on dip buying, but hawkish Fed rhetoric and a 0.4% headline CPI print keep the metal under pressure as markets price in faster policy tightening.
Tuesday's hot CPI (headline +0.4% vs 0.3% expected) already drove the dollar to a near two-week high, and hawkish Fed commentary - Waller's 9/10 Speechtracker score, Paulson and Logan backing faster tightening - points to a December rate hike of possibly 50 bps. The FXS Fed Sentiment Index rose 3.17 points to 145.50, well above neutral 100, supporting further dollar strength. Only de-escalation hopes in the US-Iran conflict are capping the greenback.
Waller's hawkish message - a possible 50-bps December hike after the 0.3% core CPI - plus supportive comments from Paulson and Logan reinforce upside risks for US Treasury yields and front-end rates, as the article explicitly states. Markets are likely to price a higher probability of additional Fed tightening.
October CPI came in hot (headline +0.4% vs 0.3% expected, core +0.3% vs 0.2% expected), and Fed Governor Waller floated a possible 50-bps hike at the December 8-9 meeting, which raises the opportunity cost of holding non-yielding gold and should cap any rebound. Dip buying has lifted the metal to $4,050, but a decisive hawkish repricing of December policy would pressure it back toward the $4,008 and $3,975 supports. Easing US-Iran tensions also erode gold's safe-haven bid.
Gold prices recovered to $4,050 during Wednesday's Asian session as the US Dollar paused following a hot inflation report. However, upside remains limited as Fed officials, including Governor Christopher Waller, signaled a potential 50-basis-point rate hike in December to combat core CPI growth of 0.3%.
Hotter-than-expected October inflation plus hawkish comments from several Fed officials, including Waller's warning that a 50-basis-point December hike may be needed, have increased expectations of Fed tightening and pushed the dollar to a near two-week high.
Because Fed officials signalled faster and possibly larger rate hikes after October inflation came in above forecasts, and the article notes this reinforces upside risks for US Treasury yields and front-end rates.
The 0.3% core CPI reading has Fed officials, including Governor Waller, talking about a possible larger 50-basis-point rate hike in December. Higher rates make non-yielding gold less attractive and strengthen the dollar, which tends to keep gold prices controlled.
Resistance sits at $4,080 and then the $4,145-$4,150 area. On the downside, supports are at $4,008, $3,975, $3,929 and near the cycle low at $3,870.