Gold Prices Rebound as Fed Hike Odds Hit 85% Despite Inflation Surge

Gold prices rebounded on Friday to $4,385.14 an ounce, up 1.6%, after a hotter US inflation report. The Consumer Price Index showed prices rising 0.4% last month and 3.4% over the past 12 months.

The CME FedWatch Tool indicated a high probability of a Federal Reserve rate hike at next week's meeting, with an 85% chance. This is typically bearish for gold, as higher rates increase the opportunity cost of holding it.

However, the market may be shifting from a 'Fed trade' to a tug-of-war between financial positioning and physical demand. Investment demand stayed firmer in China, while buying was muted in price-sensitive India.