Gold prices edge lower as US inflation data reinforces Fed outlook

Gold prices eased in early Asian trade on Friday after dropping more than 1% in the previous session, as stubborn US inflation fuelled expectations of further Federal Reserve rate hikes, weighing on bullion.

Fundamentals

Spot gold was down 0.4% at $4,006.06 per ounce by 0036 GMT, while US gold futures for December delivery droped 0.3% to $4,018.50. Bullion is headed for a modest weekly gain but remains on track for a second consecutive monthly decline.

US inflation accelerated in September as consumers paid more for gasoline and other goods, supporting economists' expectations of an interest rate increase from the Fed in December.

Traders are now pricing in about a 75% chance of a rate hike in December, according to the CME's FedWatch Tool.

Higher interest rates increase the opportunity cost of holding non-yielding bullion, reducing its appeal to investors.

The European Central Bank left interest rates unchanged in a well-telegraphed move on Thursday but clearly hinted at another hike in December with a warning that high and rising energy costs were fuelling inflation risks. ECB President Christine Lagarde will step down from her role on February 7, the central bank said.

Annual core inflation in Japan's capital well exceeded the Central Bank's 2% target in October, data showed on Friday, highlighting mounting price pressure and cementing the case for further interest rate hikes.

The London Metal Exchange is aiming to turn metal held in its Hong Kong warehouses into digital assets that can be used for financing, a move linked to the territory's five-year plan to expand its commodities hub, three people with knowledge of the matter said.

Spot silver slid 1% to $51.87 per ounce, platinum steadied at $1,488.00 and palladium fell 0.5% to $1,000.75. All three metals were headed for weekly and monthly declines.

Data/Events (Gmt)

0630 France GDP Preliminary QQ Q3

0700 US UK Nationwide house price MM,YY, October

0745 France CPI (EU Norm) Prelim YY, MM, October

0745 France CPI Prelim YY, MM NSA, October

0745 France Producer Prices YY, September

0855 Germany Unemployment Chg, Rate SA, October

0900 Germany GDP Flash QQ SA Q3

0900 Germany GDP Flash YY NSA Q3

1000 EU GDP Flash Prelim YY, QQ Q3

1000 EU Unemployment Rate, September

1300 Germany CPI Prelim YY, October

1300 Germany HICP Prelim YY, October N/A Japan JP BOJ Rate Decision, 30 October
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