Gold Prices Plummet on Bets of US Rate Hike

Gold prices dropped by their most since early June on bets that the US Federal Reserve will raise interest rates to combat inflation. Despite this, gold stabilized after falling over 3% in the previous session.

The decline was triggered by a pledge from Fed Chairman Kevin Warsh to return inflation to its 2% target, which he described as 'firm and fixed'. This has led traders to price in a more than 50% chance of a hike at the Fed's next meeting in September.

Nicky Shiels, head of research and metals strategy at MKS PAMP SA, noted that the dovish Treasury and hawkish Federal Reserve are in a 'tug of war', with the debasement trade likely to continue into September as the US Treasury starts bond buybacks and ahead of the Fed meeting.

As of 9:22 am Singapore time, spot gold was trading at $4,453.08 an ounce, down 0.1% from the previous day's close. Silver and palladium also fell by 0.1% and 2%, respectively, while platinum remained relatively unchanged.