Gold Slumps as Oil Surge Fuels Fed Rate Hike Expectations

Gold prices plummeted over 1% on Thursday as rising oil costs and US inflation data strengthened expectations of a Federal Reserve interest rate increase next week.

The spot gold price fell 1.2% to $4,349.32 per ounce around 8 pm IST, while US gold futures dropped 1.6% to $4,391.30, according to Reuters.

US producer prices rose in line with expectations in August, reflecting a rebound in energy costs. Traders subsequently priced in a 70% probability of a Fed rate hike next week, up from 62% before the data, according to the CME FedWatch Tool.

A stronger dollar and higher benchmark 10-year US Treasury yields also weighed on prices, making it more expensive for buyers using other currencies and reducing the appeal of the precious metal.