Gold Performance 29th October: gold price falls 1%, US wages up next

The gold price closed at about $4,022 an ounce on Thursday 29 October, down $46, or 1.1%, from Wednesday's close. Faster US growth and sticky core inflation kept traders betting that the Federal Reserve will raise rates in December, a day after it chose to hold them.

Where did gold lose ground on Thursday?

Most of the fall came before New York opened. Gold drifted about $13 lower in the hours after Wednesday's close, shed another $20 in Asian trade as the post-Fed bounce faded, and gave up about $14 more in London.

New York swung rather than moved. Gold touched its low of the day, near $4,007, in the early afternoon, then climbed back to finish almost exactly where London left it. The high, close to $4,069, came within an hour of Wednesday's close and was never seen again.

Why did the gold price fall?

US growth beat forecasts. The Bureau of Economic Analysis said the economy expanded at a 3.4% annual rate in the third quarter, up from 2.2% in the spring, with consumer spending growing 3.8%. Yahoo Finance called the reading stronger than expected.

Inflation is not cooling. The Fed's preferred gauge, core personal consumption expenditures prices, rose 3.1% in the year to September, from 3.0% in August. Headline PCE inflation climbed to 3.6%. Ariane Curtis of Capital Economics told Yahoo Finance that the calmer summer figures were "not the start of a new trend."

A December hike stays on the table. The Fed kept its range at 3.75% to 4.00% on Wednesday, but Lisa Cook and Beth Hammack voted for an immediate rise. Markets now put the odds of a December increase above 80%, Yahoo Finance reported, and CME Group data cited there showed about 86%. Higher rates raise the cost of holding a metal that pays nothing, as we explain in why gold falls when rates rise.

Europe offered no relief. The European Central Bank left its deposit rate at 2.50% on Thursday and warned that dearer energy could lift inflation while slowing growth.

How unusual was the drop?

On our data, only about 10% of trading days since 1968 have brought a bigger one-day fall. It is gold's fourth drop of more than 1% in October, after 7, 14 and 22 October, and it ends a three-day winning run that we tracked in Wednesday's edition.

Gold is now down about 3.3% for the month and roughly 26% below January's record near $5,426. It still sits about 0.6% above last Friday's close, so the week is not lost yet. The $4,000 line that broke last week, covered in our technical analysis, is only about $22 away.

Up next: what to watch tomorrow

• Fri 30 Oct: US employment cost index for the third quarter, 8:30 am New York time, from the Bureau of Labor Statistics. Wage growth is the next test for the December hike case.
• Fri 30 Oct: US Chicago PMI for October at 9:45 am, plus early October inflation readings from Germany, France and Italy and the first estimate of euro zone growth.
• Fri 30 Oct: Fed speeches from Mary Daly of San Francisco and Alberto Musalem of St. Louis around midday New York time.