Gold heads for weekly loss as Fed hike bets weigh

Gold was heading for a weekly loss on Friday, October 16, as stronger-than-expected US inflation readings kept the possibility of further Federal Reserve rate increases in focus. Economic Times Markets reported that spot gold was down 0.1% at $4,165.12 an ounce at 1807 GMT, leaving it 0.7% lower for the week at that point.

US gold futures for December delivery moved in the opposite direction, settling 0.3% higher at $4,181.10 an ounce. The spot figures represent a reported market snapshot, not a final weekly close.

Inflation readings keep rate uncertainty alive

Thursday's US producer-price release showed the largest monthly increase in four-and-a-half years. It followed Wednesday's consumer-price report, which showed inflation accelerating in September.

The report identified Federal Reserve Chair Kevin Warsh as expressing confidence in the strength of the US economy without indicating the central bank's next rate moves. Chicago Fed President Austan Goolsbee described the inflation data as discouraging, while Cleveland Fed President Beth Hammack said a significant worsening in public inflation expectations could require more aggressive rate increases.

Traders largely expected rates to remain unchanged in October, but were pricing in a 90% probability of an increase in December, according to CME's FedWatch Tool as cited in the report. That pricing reflects market expectations, not a commitment by the Fed.

Bart Melek, global head of commodity strategy at TD Securities, attributed gold's constrained trading range and tilt towards its lower support level to uncertainty over monetary policy. Although investors often buy gold as an inflation hedge, higher interest rates can make the metal less attractive because it pays no interest.

Hamad Hussain, a climate and commodities economist at Capital Economics, forecast a gradual decline in gold over the rest of the year. His outlook rested on expectations of further Fed rate increases and a fading of concerns about the durability of the artificial-intelligence boom.

India buying improves as prices ease

In India, gold traded at a premium this week for the first time in more than three months, with the price pullback encouraging jewellery purchases. The improvement in physical demand contrasted with the pressure on international prices from US interest-rate expectations.

Other precious metals were also on course for weekly losses. Spot silver fell 0.7% to $57.05 an ounce, platinum was unchanged at $1,626.15, and palladium declined 1.1% to $1,113.61.