Hot U.S. Inflation Data Lifts Rate Hike Risk, Crashes Gold Price
U.S. wholesale inflation rose 0.4% in August, with core producer prices up 0.3%. This hotter-than-expected data has lifted the risk of a Federal Reserve interest rate hike at its upcoming meeting on September 15-16.
The increase in producer prices was led by a 4.2% jump in energy and a 24.1% surge in diesel fuel. The European Central Bank also raised its benchmark rate by 25 basis points to 2.50%, citing energy-driven inflation pressure from the Iran conflict.
As a result, gold and silver prices have tumbled in early U.S. trading, with spot gold down 0.87% at $4,362.30 an ounce and spot silver down 3.34% at $64.920. The selloff shows that oil-driven inflation is now working against metals through the yield channel faster than it is supporting them through geopolitical demand.
The Strait of Hormuz remains a key risk factor for gold, with Brent crude near the $100 area and U.S.-Iran tensions disrupting tanker flows through the waterway. The ECB's rate hike has also underscored the global policy impact of this shock, with Europe importing higher energy costs and the U.S. seeing pass-through in producer prices.