Gold Today 20th October: gold price slips, UK CPI up next

The gold price today closed near $4,126 an ounce on Tuesday, down about $15, or 0.4%, from Monday's New York close. It was gold's third lower close in a row. Oil near a five-month high kept traders betting on another Federal Reserve rate hike in December, and that outweighed a short rally on Iran headlines in New York trade.

Where the move happened

Asian trade was calm. Gold edged up to about $4,147 around midday in Tokyo, then drifted back and reached the London open a few dollars below where it started.

Most of the fall came in London trade. Gold shed about $14 in London hours and touched the day's low, near $4,113, late in the London morning.

New York brought the one real burst of the day. Soon after 10 am New York time, gold jumped about $30 in an hour to near $4,152, its high for the session. It gave nearly all of that back by early afternoon and drifted sideways into the close, ending New York hours up about $7. Our chart above shows the full day in ten-minute steps.

Why did gold fall on Tuesday?

Oil kept inflation in view. Brent crude climbed toward a five-month high after Houthi attacks on Saudi targets, FXEmpire analyst James Hyerczyk wrote, putting a Gulf risk premium back into crude. Dearer energy feeds inflation, and that keeps the Fed leaning toward higher rates. Gold pays no interest, so higher rates make it harder to hold.

December hike bets stayed high. The CME FedWatch tool showed about a 92% chance of a December rate increase, FXStreet reported, after September's US consumer and producer price figures both came in hotter than forecast. Traders still expect the Fed to hold at its 27 to 28 October meeting, with the odds of a hike that week near 17%.

The Iran rally did not last. The New York jump came as oil reversed sharply. Israel's Channel 12 reported that a proposal from Pakistan's army chief had won American approval and preliminary Iranian agreement, according to FXStreet. The plan would reportedly pass Tehran the interest on $6 billion of Iranian funds frozen in Qatari banks. US crude fell from above $100 a barrel to near $96, and the dollar index slipped to its lowest since 1 October. Gold could not hold the gain. With December hike odds above 90%, buyers did not chase it, and the dollar and yields had little room to fall further.

Our number: three down days in a row

Tuesday was the third straight lower close in our daily data. Gold is down about 1% this week and 1.1% since Thursday's close, and it sits 24% below the record of $5,426 set on 29 January.

The losses have been small, and gold is still inside the $4,100 to $4,200 band it has held for most of October. The next level traders name is the $4,070 area, the floor in our latest technical analysis. Monday's move is in yesterday's edition.

Up next: what to watch tomorrow

• Wed 21 Oct: UK consumer price inflation for September, from the Office for National Statistics at 7:00 am London time. It is the first big inflation reading of the day for rate traders.
• Wed 21 Oct: The US Treasury sells 20-year bonds. Weak demand would push long-term yields higher, with the 10-year already above 5%.
• Wed 21 Oct: Oil and any follow-up on the reported US and Iran funds plan, the story that moved gold most on Tuesday.