Gold prices fell on Thursday as investors digested the US Federal Reserve's decision to leave interest rates unchanged and waited for key US inflation data later in the day.

Fed holds, but tightening stays on the table

Spot gold slid 0.7% to $4,037.98 per ounce by 0410 GMT, while US gold futures for December delivery steadied at $4,049.80, according to Reuters. A later reading put spot gold down 1.1% at $4,024.22, showing how quickly the metal moved during Asian trading.

Inflation data is the next trigger

The Fed held rates steady on Wednesday in the 3.75%-4.00% range, delaying any change until after next week's US midterm elections while it awaits further inflation data. The decision was taken in a split 10-2 vote, with two officials favouring an immediate hike.

Traders are now pricing in about a 78% chance of a rate hike in December, compared with 84% before the announcement, according to the CME's FedWatch Tool. Higher interest rates raise the opportunity cost of holding gold, which pays no interest, and that continues to weigh on the metal.

Markets are awaiting the Personal Consumption Expenditures data due at 1230 GMT, the Fed's preferred inflation gauge, as it targets a 2% inflation rate. Ajay Kedia of Mumbai-based Kedia Commodities put the fall down to Middle East uncertainty and positioning ahead of the inflation figures.

Other precious metals fell further: silver dropped 2.3% to $52.71, platinum 1.8% to $1,511.02 and palladium 0.5% to $1,006.03. China's net gold imports via Hong Kong rose over 28% in September from August to a five-month high, a reminder that physical demand has not disappeared even as traders sell.

Bullion is now on track for its second straight monthly fall, and the PCE reading will help decide whether that run extends or reverses.

Sources: Reuters via The Hindu BusinessLine and Reuters via Maaal.