Gold Slips Back Below $4,000 as Traders Brace for Friday's Inflation Print

Gold slid to $3,963.44 on Thursday, ducking back under $4,000 for the third time since late October. The trigger: a hotter-than-expected October inflation read that has traders now fully pricing in a Federal Reserve rate hike in December. A quarter-point move is already baked in, and Friday's Producer Price Index report could decide whether bets on a half-point shift grow.

October's Consumer Price Index climbed 0.4% month over month, above the 0.23% forecast. Odds of a half-point Fed hike have jumped to 11.2%, up from zero just a week ago. Two-year Treasury yields have added 25 basis points this week, and the US dollar gauge touched a 19-month high — double trouble for a metal that pays no interest and gets pricier for most buyers when the greenback runs.

Recent PPI days have whipsawed gold in both directions. On September 10, August producer prices matched monthly forecasts but ran hot on the annual rate, and gold dropped 1.39% as yields rose. On October 15, September producer prices surged 1.3% — more than double the 0.6% expected — yet gold gained about 1% as the 10-year yield fell during a tech-led stock selloff. Either way, gold moved opposite Treasury yields, not opposite the inflation headline.

Economists expect October PPI to rise 0.4% on the month, down from 1.3% in September. Oversea-Chinese Banking Corp. strategist Christopher Wong sees gold possibly sliding toward $3,870, near its late-October low, and warns a PPI print above forecasts could deepen the drop.

October ETF flows show where the selling came from. North America was the only region in the red, bleeding $512 million, per World Gold Council data. Globally, gold ETFs still pulled in $2.7 billion for a fourth straight month of inflows, led by Europe at $1.8 billion and Asia at $1.3 billion.

Central banks keep buying. China added 25.8 tonnes in October, its 24th consecutive monthly purchase and the biggest of the streak. Worldwide, central banks snapped up 321 tonnes in the third quarter, up 42% year on year, according to the WGC. StoneX strategist Bob Haberkorn told Reuters that buying has put a floor under prices, holding up even as the Fed and rates push against the metal. Friday's data and the Fed's December 9 decision will test whether that floor holds.