Gold Down 294 Pips as In-Line CPI Sparks a Fed Hike Sell-Off

Gold fell 294 pips this week, closing Friday at $4,165.62 against $4,195.02 a week earlier. US CPI came in exactly on forecast but still sparked a sharp Wednesday sell-off on renewed Fed hike bets. A slide in Treasury yields on Thursday then won back most of the loss.

Hourly closes ranged from a high of $4,211.76 to a low of $4,080.28. By day: Monday -257 pips, Tuesday -81, Wednesday -547, Thursday +580, Friday +11.

The high-impact news

US CPI inflation (Wed 14 Oct, 13:30 UK). CPI measures how much consumer prices rose over the month and is the main inflation figure. It matters for gold because hotter inflation strengthens the case for higher US rates, and higher rates lift yields and the dollar. Both weigh on a metal that pays no interest.

The result was 0.6% against a forecast of 0.6%, roughly in line. Gold still dropped 626 pips in the first hour and was 726 pips lower after four. Gold's first hour after CPI usually moves about 78 pips either way, so this reaction was around eight times that.

Our read: the headline matched the forecast, but the coverage treated the details as hotter than markets wanted, and bets on an October Fed hike came back. The dollar index climbed towards 103, bond yields jumped and gold fell below $4,100 to a 10-week low. The ground was already shaky. The Fed had signalled one more hike and the dollar had spent the week near an 18-month high. History offers no steady pattern here: since April 2021, gold's first hour rose 14 of 21 times after a clear miss and 12 of 25 after a clear beat. More detail is in our US CPI inflation breakdown.

US retail sales (Thu 15 Oct, 13:30 UK). This tracks spending in shops and online over the month. Strong spending supports growth and the case for higher rates. Weak spending eases that pressure.

Sales rose 0.8% against a forecast of 1.2%, a clear miss. Gold was up 23 pips after one hour and down 32 after four, both inside the usual first-hour move of about 40 pips. Since April 2021, gold's first hour has risen 13 of 20 times after a clear miss and 14 of 34 after a clear beat, so this week's small rise matches the more common outcome without being a firm rule.

Our read: the miss arrived alongside a 6.3% rise in September producer prices and a Philly Fed survey that fell to 20.9, so the soft spending figure had to compete with a hot inflation number. The bigger force that day was bond yields. Treasury yields plunged as the CPI sell-off reversed, helped by a report of Chinese buying of Treasuries and a global equity sell-off linked to tech and AI credit fears. The dollar pulled back from its 18-month high, and CTA short covering also supported prices. That drove Thursday's 580-pip gain. The full picture is in our US retail sales breakdown.

What else moved gold this week

On Monday, gold edged up early on a Russia-Ukraine "energy ceasefire" and lower oil. It then fell as rising oil prices drove a dollar rally and Fed hike bets. On Tuesday, Middle East fighting added to inflation fears.

Demand held up underneath the price. Gold ETFs took in a record $31 billion in the third quarter, according to the World Gold Council. Indian gold ETF inflows hit a seven-month high in September, and China ended the quarter with strong official buying. US gold ETFs, meanwhile, fell to a record-low share of the market as Asian holdings grew. Late in the week, several Indian mutual funds stopped bulk subscriptions to gold ETFs ahead of the festive season, and India's gold market moved back to a premium.

On Friday, Fed Chair Warsh said each meeting must be judged on its own merits and declined to prejudge October. Traders moved their hike bets towards December, and the dollar posted a weekly dip.

What the coverage is focused on now

The news is centred on Fed timing: whether the hot inflation figures mean a hike in October or December, after Warsh's refusal to commit. Treasury yields and the dollar's pullback from its 18-month high remain the other main thread. Gold's losing run, described as its longest in three decades, is being set against strong ETF and central bank demand in Asia.

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Important

For analysis purposes only. This describes last week's gold news and what gold did; it is not financial advice or a recommendation to trade. The news is no guide to where gold goes next. Trading carries a high risk of losing money.