Gold Prices Tumble as Fed Rate Hike Expectations Rise

Gold prices have taken a hit after US inflation data came in higher than expected, increasing expectations that the Federal Reserve will raise interest rates later this week. The hotter-than-expected August inflation data shows firmer-than-anticipated underlying price gains, adding to the likelihood of a rate hike.

The increased borrowing costs typically weigh on gold because it generates no interest, making yield-producing assets more attractive. Markets are now pricing in an 88% probability of a September rate hike, which could further pressure gold prices.

Meanwhile, the Middle East conflict is contributing to higher energy prices, with benchmark Brent crude climbing above $108 a barrel after rising almost 9% last week. This has added to inflation pressures, but analysts believe that geopolitical disruptions will preserve gold's safe-haven appeal.