Gold Prices Plunge as US Inflation Data Lifts Rate Hike Odds

Gold prices slipped to around $4,340 in early Asian trading on Monday as firmer US inflation data strengthened expectations of tighter monetary policy from the Federal Reserve. The Bureau of Labor Statistics reported that core CPI rose 0.3% month-on-month in August, beating a consensus estimate of 0.2%. This has lifted the probability of a rate hike to nearly 86.2%, according to the CME FedWatch tool.

The technical picture for gold is one of consolidation, with prices hovering just above the 100-day moving average at $4,332.30. However, momentum indicators are mixed, and resistance sits at $4,460, while support is seen around $4,330 and then near $4,238.07.

As the Federal Reserve meeting approaches on Wednesday, traders should be prepared for heightened volatility. Historically, gold has shown a tendency to 'sell the rumor, buy the fact' during Fed tightening cycles, often bottoming right as the rate hike is announced before starting a relief rally.