Gold climbed to around $4,200 an ounce on Wednesday after softer-than-expected US inflation data reduced the likelihood of another Federal Reserve rate hike as early as next month. The PCE price index rose 0.3% in August, below the 0.4% consensus forecast, while core PCE increased 0.2%, also undershooting expectations of 0.3%. On an annual basis, headline PCE inflation came in at 3.4%, compared with projections of 3.7%.
In response, markets are now pricing in less than a 40% probability of a 25 bps rate increase in October, a sharp drop from about 70% last Friday. Sentiment was further supported by New York Fed President John Williams, who indicated the central bank does not need to rush into another hike after this month’s increase.
Even so, precious metals remained constrained by elevated US Treasury yields, with both the 10-year and 30-year yields hovering at multi-year highs. Gold lost nearly 6% over September, weighed down by persistent energy-driven inflation and hawkish rhetoric from Fed officials that has reinforced expectations for additional policy tightening later this year.
