Gold Slides as U.S. Economic Growth and Inflation Fuel Rate Hike Bets

The U.S. economy expanded at an annualized rate of 3.4% in the third quarter, comfortably outpacing expectations and accelerating from the previous quarter's 2.2%. This surge was underpinned by a 3.8% increase in consumer spending and a 19.4% jump in fixed investment, driven largely by capital deployment in artificial intelligence infrastructure. Simultaneously, the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index, climbed 0.5% in September, pushing the annual rate to 3.6%.

These figures have solidified market expectations for further monetary tightening. Interest rate futures currently price in an 83% probability of a 25-basis-point hike at the Federal Open Market Committee’s December meeting. With the 10-year Treasury yield holding near 5.0%, the opportunity cost of holding non-yielding assets like gold has intensified. While diplomatic efforts regarding the Strait of Hormuz and potential U.S.-Iran negotiations persist, the immediate geopolitical risk premium in energy markets has softened, providing little support for gold’s traditional role as a defensive hedge. Consequently, spot gold dipped 0.99% to $4,026.20, while silver faced sharper losses, falling 2.33% to $52.59.