Gold Prices Tumble as Fed Rate Hike Bets Rise to 75%

The Federal Reserve's increasingly hawkish outlook has sent gold prices plummeting to a one-week low, with XAU/USD trading around $4,260. The benchmark 10-year US Treasury note yield jumped 15.2 basis points on Wednesday and now sits at its highest level since 2007.

The strong US S&P Global Purchasing Managers’ Index (PMI) data released earlier in the week pointed to resilient economic growth, giving the Fed more room to tackle stubborn inflation. The Composite PMI unexpectedly rose to a five-year high of 58.4 in September.

As a result, expectations are rising that the US central bank could raise interest rates again in October after delivering a 25 bps hike last week. The CME FedWatch Tool places the probability of a rate increase at around 75%, up from 55% a day earlier.