Gold prices fell below $4,100 an ounce on Wednesday to their lowest level since early August, after a stronger-than-expected US inflation reading prompted markets to reassess the Federal Reserve’s interest rate outlook. Headline US inflation accelerated to 3.7% year-on-year in September, above the 3.6% consensus forecast, driven largely by higher energy costs. On a monthly basis, the CPI rose 0.6%—the sharpest increase in five months—while core inflation also surprised to the upside, climbing 2.6% year-on-year and 0.3% month-on-month.
According to LSEG data, markets now assign roughly a 50% probability that the Fed will keep rates unchanged at its October meeting, down from more than 78% before the release. At the same time, the implied likelihood of a rate hike in December has risen to nearly 99%, from 88% previously. While recent Fed commentary had given little indication of back-to-back rate increases in October, the stronger-than-expected core CPI print has put that scenario back on the radar, intensifying pressure on non-yielding gold.
