Gold prices rose by about 1% on Thursday, recovering from a one-week low hit on Wednesday, supported by a weaker dollar and investors' assessment of the likelihood of a US interest rate hike this month, following data showing inflation accelerating.
Gold rose 0.99% in spot trading to $4,145.94 an ounce, after hitting its lowest level since October 7 in the previous session. U.S. gold futures for December delivery also climbed 1.4% to $4,166.50 an ounce.
The dollar retreated after hitting its highest level in 18 months during overnight trading, making the precious metal priced in the US currency less expensive for holders of other currencies.
Kyle Rodda, senior financial markets analyst at Capital.com, said the current moves reflect uncertainty in the markets about the path of US interest rates, which is leading to increased volatility.
He told Reuters that gold is approaching a critical level just below $4,000, noting that the release of strong economic data again could reinforce expectations that the Federal Reserve will be forced to raise interest rates at a relatively rapid pace, making that the focus of the markets.
Consumer prices in the United States rose more rapidly in September, driven by a sharp increase in the cost of gasoline.
Mary Daly, president of the Federal Reserve Bank of San Francisco, said the U.S. central bank may have to raise short-term interest rates by a larger amount, but indicated there was no need to raise them during the October meeting scheduled for the 27th and 28th of this month.
Although gold is seen as a hedge against inflation, rising interest rates reduce its appeal, given that it does not generate a return.
Markets are awaiting the release of US producer price index and retail sales data, scheduled for 12:30 GMT.
