Gold Plummets 2% as Hot US CPI Data Boosts the Dollar

Gold prices (XAU/USD) fell by approximately 2% to the US$4,052 per troy ounce range during Tuesday’s trading session, erasing all gains from the previous day. The downward pressure followed US inflation data that came in higher than anticipated, fueling a strengthening of the US dollar.

The US Consumer Price Index (CPI) rose by 0.4% month-on-month in October—exceeding the 0.3% expectation—while the core CPI climbed 0.3%, also surpassing the 0.2% forecast. These figures reinforced concerns that inflationary pressures remain significantly elevated.

The US Dollar Index climbed back above the 102.00 level, having previously touched 101.49. The dollar’s ​​strength reflects growing expectations that the Federal Reserve may raise interest rates again at its December meeting.

Fed Governor Christopher Waller recently indicated his support for a 25-basis-point rate hike, while leaving the door open for a 50-basis-point increase should inflationary pressures persist. This hawkish stance serves as a major headwind for gold, a non-yielding asset.

Nevertheless, a decline in oil prices could act as a counterbalancing factor. WTI crude has fallen toward US$84 per barrel, a development that could potentially ease inflationary pressure and reduce the need for more aggressive monetary tightening by the Fed. Moving forward, the market will closely monitor the dollar’s ​​reaction and interest rate expectations to determine the next direction for gold.