NEW YORK: Gold fell more than 1% on Friday as the dollar and bond yields climbed after data showed underlying inflation pressures remained high, cementing expectations around another hefty rate hike from the US Federal Reserve next week.

Spot gold fell 1.3% to $1,641.30 per ounce by 1:43 p.m. ET (1743 GMT). US gold futures settled down 1.3% at $1,644.8. Consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.6% last month, the Commerce Department said.

“There is concern that core PCE at 0.5% monthly or 6% on an annual basis will keep the Fed relatively more aggressive and a slowdown in hikes will come later rather than sooner,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

Gold has been a little disappointing this week given the huge bond rally and the dollar moving lower - which should have seen it head towards $1,700, he added. The dollar gained 0.3% against its rivals after the US economic data, making gold more expensive for other currency holders. The benchmark US Treasury yields also rose.

The Fed is widely expected to raise interest rate by 75 basis-point at its policy meeting on Nov. 1-2. For December, traders are largely expecting a 50 basis point increase. Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar.

“Another pronounced rate hike of 75 basis points is generally anticipated after US inflation remained stubbornly high again in September,” Commerzbank analysts said in a note.

“That said, if the central bankers were to hint that they will raise their key rate at a less aggressive pace in future – in response to the cooling economy, for instance – the gold price could be lent some tailwind.” Spot silver fell 2.1% to $19.17 per ounce, platinum dropped 1.8% to $942.13, while palladium declined 2.4% to $1,895.46.