Gold Prices Plummet as Fed Rate Hike Bets Soar on Strong US Inflation

Gold prices in international markets fell by over 1% on Thursday following stronger-than-expected US inflation signals and rising oil prices. This led to increased expectations of tighter monetary policy by the Federal Reserve, causing gold prices to drop.

Spot gold fell 1.2% to $4,349.32 per ounce around 7 pm IST, while US gold futures declined 1.6% to $4,391.30. The data showed that US producer prices increased in line with expectations in August, driven partly by a rebound in energy costs.

Analysts said the data pointed to some pickup in underlying inflationary pressures in the US economy, with higher energy prices adding to the concerns. Traders are now pricing in a 70% chance of a Fed rate hike next week, up from 62% before the data, according to the CME FedWatch Tool.

The US dollar strengthened, making gold priced in the greenback more expensive for buyers holding other currencies. Higher 10-year US Treasury yields also weighed on bullion, as rising yields increase the opportunity cost of holding the non-yielding asset.