Gold Price Slumps Below $4,400 as Fed Rate Hike Bets Rise

The gold price has come under renewed pressure, falling below US$4,400 as rising oil prices and a stronger US dollar increase expectations of a Federal Reserve rate hike. The recent sharp sell-off in spot gold has broken below the psychological level of US$4,400, with Reuters reporting a brief dip to approximately US$4,313 per ounce. Higher oil prices are increasing inflation expectations, while a firmer US dollar raises the opportunity cost of holding non-yielding assets like gold.

The Federal Reserve is the biggest near-term driver for the market, with producer prices increasing 0.4% month-on-month in August and the annual PPI rate accelerating to 5.4%. This has led to a 70% probability of a 25-basis-point Fed rate hike at the September meeting, which could put downward pressure on gold.

The US August CPI report due on September 11 is crucial for markets, as a softer-than-expected inflation reading could reduce rate-hike expectations and give gold room to rebound. A sustained move above US$4,600 would improve the technical outlook and bring US$4,700-4,800 back into focus.