Gold price slumps as faster US inflation stokes Fed rate hike wagers

Gold slumped after US consumer prices jumped the most in five months, reigniting worries that the Federal Reserve will need to raise interest rates further to combat inflation.

The consumer price index rose 0.6% in September from a month earlier, according to Bureau of Labor Statistics data out Wednesday. The move was driven by rising fuel costs, while a gauge of underlying price pressures also rose more than expected.

Bullion slumped as much as 1.9% below $4,090 an ounce, with a flare-up in attacks in the Middle East also stoking worries that further disruptions to regional energy supplies will accelerate inflation and add to the case for higher borrowing costs, a headwind for non-yielding gold. Silver, platinum and palladium also slumped, while the dollar rallied 0.4%.

Copper dropped 0.4% on the London Metal Exchange, with the rallying dollar and the prospect of higher borrowing costs dimming the outlook for the key industrial metal. 

The Fed in September responded to renewed price pressures by raising interest rates for the first time since 2023. Since then, top officials have signaled they have time to weigh incoming data before acting again, though the median official expects one more increase this year, according to their latest projections.

Traders are now pricing the probability of another hike at its next meeting in October at more than 50%, with three increases seen by April.

(By Jack Ryan and Mark Burton)