Gold fell for a third consecutive session on Thursday, dropping to its lowest level in more than a week as a robust US dollar and growing expectations of further interest-rate rises from the Federal Reserve weighed on the metal.

Spot gold was down 1% at $3,948.82 an ounce by 1114 GMT, having touched its lowest level since 4 November earlier in the session, Reuters reported. US gold futures for December delivery fell 1.1% to $3,954.50 an ounce. The metal had already slipped below the psychologically important $4,000 level on Wednesday, falling 1.2% in that session after a sell-off of almost 3% on Tuesday. By Thursday afternoon, reports put spot gold lower still, at $3,858 an ounce.

The trigger was US inflation data released on Tuesday, which came in hotter than expected. Consumer prices rose 0.4% in October, above the 0.3% increase economists had forecast, while core inflation, which excludes food and energy, rose 0.3%. The figures pushed the dollar to a 19-month high against major currencies, with the dollar index climbing towards 102.90, close to its highest since April 2025.

A stronger dollar makes gold more expensive for buyers using other currencies, which tends to reduce demand. Higher interest rates also work against gold because the metal pays no interest, so holding it becomes less attractive compared with bonds and other assets that pay a yield.

Markets now expect a December rate rise

Traders have responded by pricing in a Federal Reserve rate rise in December almost in full. Markets now see a 91% chance of a 25-basis-point increase at the Fed's December meeting, according to CME's FedWatch tool, while the probability of a larger 50-basis-point move has risen to 10% from zero before the inflation data.

Federal Reserve Governor Christopher Waller had said before the figures were published that an October core inflation reading of 0.3% would lead him to consider a 50-basis-point rise in December, and the core figure duly came in at that level. Hawkish remarks from several Fed officials have reinforced the shift in expectations, and two-year US Treasury yields have climbed 25 basis points this week.

Saxo Bank's head of commodity strategy, Ole Hansen, said gold had retreated to test support around $3,970 as sellers focused on persistent US inflation and hawkish comments from Fed officials. He added that speculation had grown that the Fed could opt for a 50-basis-point rise in December, despite the recent sharp fall in energy prices, which may help ease inflation in the months ahead.

Investors now await Friday's US producer price report for further signals on the interest-rate outlook. The producer price index, due at 13:30 GMT on Friday, tracks the prices businesses receive for their goods and services. A hot reading would strengthen the case for a half-point Fed rise and push gold lower, while a softer one could offer some relief.

Central bank buying offers a floor

The longer-term picture looks different from the short-term sell-off. Central banks bought 321 tonnes of gold in the third quarter, well above Standard Chartered's estimate of 200 tonnes, while global gold exchange-traded funds attracted 211 tonnes, their strongest quarter since 2024. Analysts say that steady official buying has put a floor under prices, even as higher rates work against the metal in the short term.

Standard Chartered still expects gold to average $4,650 in the final quarter of this year and $4,850 in the first quarter of 2027, with $4,200 as the next major ceiling. TD Securities is more cautious, expecting gold to retest support near $3,900 as higher interest rates and a stronger dollar continue to weigh on investment demand.

Other precious metals also fell on Thursday. Spot silver dropped 1% to $51.16 an ounce, while palladium fell 0.6% to $1,021.25 after hitting its highest level since 22 October on Wednesday. In the UK, Bank of England policymaker Megan Greene said on Wednesday that it was appropriate to tighten monetary policy proactively to guard against the risk of wage growth becoming stuck at higher levels.

Sources: Kitco News (Reuters), FX Leaders, TipRanks