Gold Prices Slip as Fed Rate Hike Bets Soar to 89%

Gold prices fell on Monday as expectations of a U.S. Federal Reserve interest rate hike strengthened following recent hot inflation data and rising oil prices.

Spot gold dropped 0.9% to $4,308.24 per ounce, while US gold futures decreased by 1.4% to $4,348.50. The dollar firmed at an over one-week high, making greenback-priced bullion more expensive for holders of other currencies.

Markets are now fully pricing in a Fed rate hike following last week's CPI data, according to UBS analyst Giovanni Staunovo. The renewed rise in oil prices could reinforce inflation concerns and keep the Fed on a hawkish footing.

Traders are pricing in about an 89% chance of a rate hike at the central bank's policy meeting this week, up from around 67% prior to the inflation data last week. Major banks such as Goldman Sachs and HSBC now expect the Fed to raise interest rates by 25-basis-points at its policy meeting on Tuesday and Wednesday.