Fed Hike Odds Surge as Gold Prices Slump on Higher Inflation

Gold prices have taken a hit as a stronger-than-expected US inflation reading has increased the likelihood of a Federal Reserve rate hike this week. The core consumer price index, which excludes food and energy costs, rose 0.3% in August from the previous month.

This has led traders to assign an 88% probability to a September interest rate increase, marking the first hike in three years. Higher interest rates typically negatively impact gold as it offers no yield.

Gold prices have been hovering around $4,340 per ounce after a third consecutive weekly decline, with spot gold slipping 0.2% to $4,339.96 at 8:30 am in Singapore. Technicians note that prices are circling the 100-day moving average.

The Bloomberg Dollar Spot Index has edged up slightly amid changing rates and headlines, while oil prices have continued to climb due to conflict in the Middle East, adding to inflation pressure.