Gold prices edge lower as US inflation data reinforces Fed outlook

Oct 30 (Reuters) - Gold prices eased in early Asian trade on Friday after dropping more than 1% in the previous session, as stubborn US inflation fuelled expectations of further Federal Reserve rate hikes, weighing on bullion.

FUNDAMENTALS

* Spot gold was down 0.4% at $4,006.06 per ounce by 0036 GMT, while US gold futures for December delivery droped 0.3% to $4,018.50. Bullion is headed for a modest weekly gain but remains on track for a second consecutive monthly decline.

* US inflation accelerated in September as consumers paid more for gasoline and other goods, supporting economists' expectations of an interest rate increase from the Fed in December.

* Traders are now pricing in about a 75% chance of a rate hike in December, according to the CME's FedWatch Tool.

* Higher interest rates increase the opportunity cost of holding non-yielding bullion, reducing its appeal to investors.

* The European Central Bank left interest rates unchanged in a well-telegraphed move on Thursday but clearly hinted at another hike in December with a warning that high and rising energy costs were fuelling inflation risks. ECB President Christine Lagarde will step down from her role on February 7, the central bank said.

* Annual core inflation in Japan's capital well exceeded the Central Bank's 2% target in October, data showed on Friday, highlighting mounting price pressure and cementing the case for further interest rate hikes.

* The London Metal Exchange is aiming to turn metal held in its Hong Kong warehouses into digital assets that can be used for financing, a move linked to the territory's five-year plan to expand its commodities hub, three people with knowledge of the matter said.

* Spot silver slid 1% to $51.87 per ounce, platinum steadied at $1,488.00 and palladium fell 0.5% to $1,000.75. All three metals were headed for weekly and monthly declines.