Year-over-year, consumer prices were 0.2% higher from the same month a year earlier, compared to expectations for a 0.1% increase and after holding flat in September.
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Gold briefly rose on Monday to its highest in a week at $1,097.90 an ounce after the attacks prompted a flight to safety among investors, but it failed to maintain those gains. Investors’ focus returned to the outlook for U.S. borrowing costs, and inflation figures set for release today will provide additional clues on whether the Fed will tighten.
The market drifted down in early trading but the losses gained pace in late morning as the dollar strengthened, and the market broke below price levels where it previously held up.
“This continuing narrative should remain supportive of the dollar and induce pressure on gold at least until the actual rate decision is made by the Fed in its mid-December meeting”, Chen added.
With any sustained breakdown below the $1080 support area and the new five-year low, the price of gold could be sent plummeting down towards the $1050-area support target on its way potentially towards the $1000 psychological price level. This has increased global uncertainty, and now investors are opting for the bullion as a safe-haven asset. Prices sank 0.5% last week, dropping to $1 074.25 on Thursday, the lowest since February 2010.
First, the surprisingly weak retail sales and producer prices data for October ahead of the supposed-to-be-peak holiday season is a major stumbling block for Fed’s rate hike decision. The rationale is that other assets, including equities, bonds and even other commodities, could drop in price dramatically as consumers huddle up and curb spending, or industry sees changes in buying patterns.
Whilst withdrawals from exchange-traded products backed by precious metals continue. “And it looks as if we have seen most of that move already and the metal is struggling to make it back above $1,100”. This was roughly 10 times higher than the average volume during that period in the last two months.
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In other precious metals markets, silver settled down 0.5% at $14.171 an ounce, platinum settled down 1.1% at $855 an ounce and palladium settled down 0.7% at $546.50 an ounce. Analysts cautioned that the gains may prove to be short term, with the metal’s trajectory still likely to be determined by the Federal Reserve.
