Gold slips below $4,000 for a third straight loss as Fed hike bets lift the dollar

Gold fell back under $4,000 an ounce on Thursday morning for the third session in a row. December gold futures stood near $3,950.50 in New York trading, according to Yahoo Finance data, and a spot quote from gold-api.com read about $3,945 at 7:16 AM ET. Trading Economics attributed the slide to a stronger dollar after hotter-than-expected US inflation figures and hawkish comments from Fed officials.

The three-day slide in numbers

Source: Yahoo Finance daily data for GC=F and DX-Y.NYB, read the morning of Nov. 12. Our arithmetic: $3,950.50 is 4.0% below $4,114.50, and 16.1% below the May 13 futures high of $4,706.70.

The dollar rose about 1.2% over the same stretch. Gold pays no interest and is priced in dollars, so a stronger dollar and higher yields hit it from two sides. The 10-year Treasury yield was 4.998% on Wednesday's close in Yahoo's data, within a hair of the 5% level.

What is driving it

The trigger was October CPI: headline up 0.4% and core up 0.3%, above forecasts. Fed Governor Christopher Waller had said in a Nov. 10 speech that a core reading around 0.3% would put a 50 basis point hike on the table for December. Dallas Fed President Lorie Logan has called for at least two more quarter-point increases, as we reported Wednesday.

Trading Economics says markets now price roughly a 91% probability of a hike in December, with more increases in January and possibly April. That is one outlet's reading of futures pricing; Wednesday's CNBC report, citing CME FedWatch, had a half-point move at 15%. The Fed's target range is 3.75% to 4.00% after September's quarter-point hike.

Why $4,000 is a headline, not a floor

Round numbers draw attention, but this is not the first time gold has traded under $4,000 this year: it also dipped below in June, and our own futures data show a low of $3,898.90 on Oct. 30. Thursday's price is still above that low. The more useful fact is the direction: each of the last three sessions has been lower, and the reason, a Fed that may hike faster, has not changed.

Who it hits

• Jewelers and coin dealers reprice buy-back quotes: a $164 drop in the ounce price is about $5.27 per gram of pure gold ($164 divided by 31.1035).
• Gold miners and royalty companies take the margin hit first; Wheaton's record quarter was struck at higher prices.
• Anyone hedging with gold has seen it fall as yields rose, the opposite of what many expected from a safe haven.

What to watch

Trading Economics lists weekly jobless claims, existing home sales and producer prices as the next releases. A cooler producer-price reading could ease hike bets; a hot one would add to them. Our gold chart and Fed coverage track both.

Sources: Yahoo Finance; Trading Economics; gold-api.com; Federal Reserve; CNBC. Some data may be delayed. This is market information, not investment advice.