Gold Prices Plummet as Strong US Inflation Data Fuels Rate Hike Bets

Gold prices fell by 0.92% to ₹1,52,341 as strong US producer inflation data boosted expectations of a Federal Reserve rate hike next week. The US Producer Price Index (PPI) rose 0.4% in August, while annual producer inflation accelerated to 5.4%, exceeding the forecasted 5.3%. Rising energy prices and broader cost pass-through contributed to this increase.

The stronger-than-expected PPI data also fueled expectations of further European Central Bank (ECB) tightening. The ECB had previously raised rates and warned about upward-trending inflation risks, increasing the likelihood of a rate hike on September 16. Markets are now pricing in over 70% probability of this event.

However, some positive news for gold came from China, where the People's Bank of China extended its gold-buying streak to 22 consecutive months, increasing holdings to 76.73 million fine troy ounces and boosting reserves to $350.08 billion. Indian demand also improved due to lower prices, which narrowed dealer discounts to as much as $54 per ounce from $135 last week.