Gold Prices Sink as Fed Rate Hike Expectations Outweigh Weaker Dollar

Gold prices declined on Tuesday as elevated expectations of a Federal Reserve rate hike and higher oil prices offset support from a weaker dollar. The gold market experienced losses, with spot gold down 0.7% to $4,375.66/oz, while silver dipped 1.3% to $4,419.64/oz.

The recent surge in oil prices has been driven by the ongoing military escalation between the US and Iran, with reports of drone and missile strikes targeting key infrastructure in the region. The conflict has exacerbated supply disruption concerns and weighed on oil flows through the Strait of Hormuz.

Market participants are closely watching the upcoming inflation data releases, particularly this week's August producer price index (PPI) and consumer price index (CPI) reports. According to José Torres, senior economist at Interactive Brokers, a high 3s reading for September's CPI would warrant an interest rate hike by the Federal Reserve.