Gold Slips Amid Escalating Rate Hike Expectations
A surprise jump in US inflation figures sent gold prices into a tailspin on Thursday, despite escalating tensions in the Persian Gulf. The metal was unable to capitalize on the conflict's typical safe-haven bid, as investors instead focused on Federal Reserve rate hike expectations.
The producer price index rose 0.4% month-on-month and 5.4% year-over-year, beating estimates and boosting the likelihood of a Fed rate increase at its September meeting from 40% to over 70%. This shift weighed heavily on gold, which pays no yield and becomes less attractive as interest rates rise.
Despite spot gold edging up 0.8% on the day to $4,351.19 an ounce, it fell 1.8% over the week due to increased rate-hike odds. The European Central Bank's rate decision also loomed large, with economists polled by Reuters predicting a hold steady on rates through 2026.