Gold Rebounds on Fed Rate Hike Bets After US Inflation Data

Gold prices rebounded on Friday, rising more than 1 percent after recent losses. The increase came despite strong US inflation data that bolstered expectations of a Federal Reserve rate hike next week.

The Consumer Price Index increased 0.4 percent in August, up from 0.1 percent in July. This data reinforced bets on a Fed rate hike, with traders pricing in an 87 percent chance of a hike at the upcoming policy meeting, up from 67 percent before the inflation data was released.

Spot gold rose 1.2 percent to $4,366.69 per ounce, while US gold futures gained 0.1 percent to $4,409.30. The metal was still down about 1.4 percent for the week.

Tai Wong, an independent metals trader, said 'Gold is recovering rapidly after a brief dip, as CPI data may be cementing expectations of a Fed rate hike next week.' He noted that market had a hike 70 percent priced in and that price action suggests gold is finding a short-term base after the recent retreat.