The inflation report showed consumer prices rising 0.6% in September, bringing the annual rate to 3.7% and exceeding consensus expectations. The data significantly altered market sentiment, with the probability of an October Fed rate hike jumping to nearly 40% from roughly 20% prior to the release. Gasoline costs, which surged 9.1%, served as a primary driver for the headline increase.
Gold Drops Below $4,100 as Hot Inflation Fuels Rate Hike Bets
A hotter-than-expected September consumer price index triggered a sharp sell-off in precious metals Wednesday, pushing spot gold to $4,098.80 an ounce. The inflation surprise sent Treasury yields higher and bolstered the dollar, as markets rapidly priced in more aggressive tightening from the Federal Reserve before the year ends.
Precious metals bore the brunt of the market reaction. Silver faced heavy selling pressure, plunging 6.16% to $55.410 an ounce. North American equities also struggled under the weight of higher yields, with the Nasdaq Composite falling 1.9% and the S&P 500 recording its worst daily performance since July. Meanwhile, geopolitical tensions in the Middle East provided a conflicting backdrop; while energy markets remained volatile following a Houthi strike on a Saudi Aramco facility, elevated oil prices only served to reinforce inflation concerns, further constraining the outlook for precious metals.
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