Gold's Best Week Since February Thanks to A Strong U.S. CPI

Gold prices remained at a two-and-a-half-month high on Friday and were poised for their best week in over eight months, as signs of moderating U.S. inflation bolstered expectations that the Federal Reserve would slow the pace of future interest rate hikes.

A softer-than-anticipated CPI inflation report boosted metal markets across the board, with expectations for a smaller interest rate increase by the Fed increasing in response. In October, the U.S. Consumer Price Index (CPI) rose by 7.7%, the lowest pace in nine months.

The probability that the Federal Reserve will increase interest rates by 50 basis points in December is currently priced in at 85%, up from 47% last week.

The dollar fell to its lowest level in almost three months, as 10-year U.S. Treasury yields rose. Treasury rates reached their lowest level in a month, dipping below 4%.

This resulted in a huge surge in the price of bullion, which had been badly depressed this year as the opportunity cost of holding non-yielding assets climbed due to rising interest rates.

At 19:04 EDT, spot gold slipped 0.2% to $1,751.92 per ounce, whilst gold futures decreased 0.2% to $1,755.20 per ounce (00:04 GMT). Both assets increased by around 3 percent on Thursday and are expected to increase by 4.3% this week, their best performance since late February.

Despite indications of a slowdown in U.S. inflation in October, price pressures remained far over the Fed's 2% target. This will need more, though slower, interest rate rises by the bank.

Fed Chair Jerome Powell has cautioned that interest rates may peak at a higher level than anticipated and that the Fed is willing to incur some economic damage in its fight against inflation; this augurs persistent pressure from rising interest rates on the vast majority of assets.

Following the release of the inflation report, copper prices on Friday hovered at their highest levels in two and a half months.

Copper futures decreased 0.2% to $3,7700, but a weekly increase of 2.3% was anticipated. Recent concerns about weak demand in China, the world's largest importer, have impacted the price of the red metal.

Copper markets are anticipated to experience a tighter supply in the coming months, primarily as a result of production interruptions in Chile and Peru, two key producers.

This is expected to increase copper prices in the medium term.