Gold Dips Below $4,600 Amid Hawkish Rate Hike Odds and Geopolitics

Gold prices dropped below $4,600 in early European trading on Friday as inflation data from the US kept the possibility of further Federal Reserve tightening in play. The core PCE Price Index held steady at 3.3% year-over-year in July, while both headline and core PCE rose 0.2% month-over-month, according to the BEA.

Following the release, the implied probability of a September rate hike increased to 40% from 36%, as indicated by CME FedWatch. This development tends to put pressure on non-yielding assets like gold. However, geopolitical tensions may provide some counterbalance, with Reuters reporting that Iran's security chief Mohsen Rezaei stated Tehran is preparing conditions for opening the Strait of Hormuz, which could temper oil-led inflation risks.

Gold traders should be prepared for heightened volatility in the coming weeks as they navigate these dual forces. Historically, gold has experienced sharp corrections during rate-hike cycles, yet long-term demand remains robust due to central bank buying, which has remained high over the past few years.