Gold dropped about 1% on Thursday after the release of United States inflation and growth data strengthened expectations that the Federal Reserve will raise interest rates in December. Spot gold traded at around $4,022 an ounce, down 1.11% on the day, according to FXStreet, while Kitco put the metal at $4,025.24 shortly after the data, a fall of 1.03%. The figures landed a day after the Fed held its benchmark rate steady.

Inflation still running above target

The headline Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, rose 0.5% in September from August, with annual inflation climbing to 3.6% from 3.4%. Core PCE, which strips out food and energy, rose 0.3% on the month and 3.1% on the year, both in line with forecasts. The data showed inflation easing only slowly, remaining well above the Fed's 2% target, and it arrived alongside a stronger-than-expected estimate of 3.4% annualised growth in the third quarter. The Federal Open Market Committee had voted 10-2 on Wednesday to hold rates at 3.75% to 4.00%, with Governor Lisa Cook and Cleveland Fed President Beth Hammack favouring an immediate increase.

Silver falls further as traders eye $4,000

Traders now price roughly an 83% chance of a December rate rise, according to the CME FedWatch Tool cited by FXStreet, and analysts at Rabobank said Chair Kevin Warsh had effectively made the case for a December move without giving forward guidance. Higher rates raise the opportunity cost of holding gold, which pays no yield, and a firmer dollar, with the dollar index around 102.30, added further pressure. Silver fell further than gold, down about 1.9% to near $52.93 an ounce, while platinum and palladium also slipped. Bullion is on track for a second straight monthly decline, and traders are watching whether the $4,000 level holds in the sessions ahead.

Sources: FXStreet, Kitco (Reuters).