Gold slumps to near $4,100 as hotter US CPI increases Fed rate hike odds

• Gold price tumbles to around $4,100 in Thursday’s early Asian session.
• US CPI rose to 3.7% YoY in September, hotter than expected.
• Traders increase their bets on an October Fed rate hike.

Gold price (XAU/USD) falls to near $4,100 during the early Asian session on Thursday. The precious metal attracts some sellers as a hotter-than-expected US inflation reading increased Federal Reserve (Fed) rate hike bets for October. Traders will take more cues from the US September Producer Price Index (PPI) and Retail Sales data later on Thursday.

Data released by the US Bureau of Labor Statistics (BLS) on Wednesday showed that the US Consumer Price Index (CPI) climbed 3.7% YoY in September, compared to 3.4% in August. This figure came in above the consensus of 3.6%.

The core Consumer Price Index, excluding fluctuating food and energy costs, rose by 2.6% YoY in September, versus a 2.4% rise prior, stronger than the 2.5% expected. On a monthly basis, the CPI and core CPI increased by 0.6% and 0.3%, respectively.

"At this point it portends that the Fed is more likely to raise interest rates," David Meger, director of metals trading at High Ridge Futures, said, citing hotter-than-expected consumer price index (CPI) data that has remained above the central bank’s targets.

Markets see about a 31.6% odds of a US rate hike this month, up from about 22% before the inflation data, and are pricing in an 89.7% chance of an increase in December, ‌according to the CME FedWatch tool. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.

Gold pressured by inflation as CTA selling meets strong support near key levels

According to TD Securities, “stronger inflation data has put precious metals under pressure, with CTAs turning large sellers in gold and platinum.” The bank notes that “CTAs have turned heavy sellers of gold amid a higher than expected inflation print and as prices have found heavy resistance near the $4,200/oz level.” However, TD Securities also highlights that offsetting flows “have ultimately offered strong support for gold,” adding that “we expect these flows will remain robust, especially in the $4,000-4,100/oz region.”

Daly stresses patience on inflation but keeps Fed firmly hawkish

The FXS Speechtracker score of 6.8/10 marks a modest hawkish tilt relative to the historical average of 6.1/10, underscoring a tone that is firm but not alarmist. Daly’s emphasis that gas-driven headline CPI is rising while core inflation remains stubborn, alongside the remark that more rate hikes are “likely” yet timing should be “thoughtful and deliberate,” signals a preference for maintaining tightening bias while avoiding rushed action. The focus on persistent above-target inflation risks, a steady labor market, and the reassurance that markets understand the Fed’s reaction framework reinforces a message of sustained vigilance on price stability that is supportive of the Dollar.

The FXS Fed Sentiment Index fell by 0.84 points to 128.17, indicating a slight pullback in perceived hawkishness even as the index remains well above the neutral 100 mark. This configuration shows the Fed still firmly in hawkish territory despite the marginal softening in tone, with the FXS Fed Sentiment Index and FXS Speechtracker together pointing to a central bank that is prepared to hike again but in a measured, data-dependent manner.

Technical Analysis: Gold retains a negative tone below the 100-day SMA

In the daily chart, XAU/USD keeps a bearish near-term tone as spot holds below the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle band. Price is drifting toward the lower half of the recent volatility envelope, while the Relative Strength Index (14) at 38.73 sits in neutral-to-soft territory, hinting that selling pressure is present but not yet stretched into oversold conditions.

On the topside, initial resistance is located at the Bollinger middle band near $4,210, followed by the 100-day SMA around $4,250, with a stronger cap emerging at the Bollinger upper band near $4,390 if a corrective bounce extends. On the downside, the first notable support aligns with the Bollinger lower band at $4,035, where bears could consider booking profits or where a more meaningful reaction higher might develop if the decline continues.

(The technical analysis of this story was written with the help of an AI tool. Know more.)