Hedge funds have renewed their bearish bets, keeping the price of gold around $1,650 per ounce.
The Federal Reserve's aggressive monetary policy remains the biggest obstacle for gold prices, as rate hikes are supporting the US dollar at its highest level in 20 years.
In a report published on Monday, commodity analysts at Societe Generale noted that the total outflow in the precious metal market has reached $4.1 billion as investors continue to react to a hotter-than-expected inflation print.
"The US core CPI increased by 6.6% from a year ago, the strongest y-o-y jump since 1982," the analysts said. "This leaves room for the Fed to increase interest rates more aggressively, suggesting that another 75bp hike in November is highly likely."
Commodity analysts at TD Securities also stated that rising inflation would continue to put pressure on gold and silver prices.
"Inflation's rising persistence suggests the Fed is unlikely to stop hiking preemptively, which points to a prolonged period of restrictive rates that should continue to sap interest from institutional investors," the analysts said.
According to CFTC's disaggregated Commitments of Traders report for the week ending October 18, money managers have decreased their speculative gross long positions in Comex gold futures by 5,021 contracts to 73,344. At the same time, short positions jumped by 15,097 contracts to 99,042.
The market trend has sharply revered after two weeks of bullish momentum. Gold's net short positioning has increased to 25,698 contracts.
Some analysts believe that investors do not want to return into the gold market until definitive proof emerges that the aggressive rate hikes are coming to an end.
The CME FedWatch tool shows that markets are nearly 50/50 split on whether the Fed will raise interest rates by 50 or 75 basis points in December.
Commodity analysts at Commerzbank noted that Friday's gold rally shows the upside potential in the market when the US central bank eventually starts to slow its monetary policy tightening.
Silver also continues to experience difficulties due to strongly bearish sentiments alongside gold.
The CFTC's disaggregated report shows that money managers have increased their speculative long positions in Comex silver futures by 2,872 to 36,365. At the same time, short positions rose by 10,699 contracts to 44,077.
Silver has fallen once again into a net short position of 7,712 contracts. The precious metal traded at around $18.50 an ounce during the survey period.
While investment demand for silver continues to decline, many market analysts say that the precious metal has some support from the unprecedented high demand for silver bullion.
