Investing.com – Gold prices fell sharply as upbeat inflation data lifted treasury yields higher sparking a recovery in the dollar, while signs of progress on tax reform weighed on sentiment.
Gold futures for December delivery on the Comex division of the New York Mercantile Exchange fell by $10.44, or 0.80%, to $1271.85 a troy ounce.
The Core Price Consumer Expenditure (PCE) Index – the Fed’s preferred measure of inflation – rose 1.4% in October year-on-year, compared to a 1.3% rise in the previous month, while September inflation was revised upward to 1.4% from 1.3%.
The upbeat inflation report, fuelled expectations that the Federal Reserve would adopt a more aggressive stance on monetary policy, lifting yields and the dollar higher, which pressured gold prices to a nearly two-week low.
Chief economist at Amherst Pierpont Securities Stephen Stanley said the “tentative evidence” of a turnaround in the trend of slowing inflation could “soothe” concerns of subdued inflation among “all but the most dovish” policy makers.
Gold is sensitive to moves higher in both bond yields and the U.S. dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding non-yielding assets such as bullion.
Also weighing on gold was easing uncertainty over tax reform after Sen. John McCain announced his support of the Senate's tax bill, greatly increasing its chances of passage through the congressional body.
In other precious metal trade, silver futures fell 0.84% to $16.32 a troy ounce, while platinum futures gained 0.22% to $943.45.
Copper traded at $3.07, up 0.15%, while natural gas fell by 3.93% to $3.05. Natural gas came under pressure after data showed that domestic supplies in storage fell less than forecast last week.