Gold Slumps as Fed Hike Expectations Soar on Inflation Concerns

Gold prices dropped to two-week lows on Tuesday as rising oil costs and Federal Reserve Chair Kevin Warsh's hawkish comments strengthened expectations for a US rate hike this month.

The price of gold hovered around $4,460 an ounce, while oil prices rose for the second straight session after US forces struck an island in the Strait of Hormuz, prompting Iran to attack the UAE and Jordan.

The increase in energy costs is fueling inflation concerns, making a near-term Fed rate hike more likely, typically bad news for gold investors.

Fed Chair Kevin Warsh said the central bank would 'have work to do' without clearer evidence that inflation is moving back toward its 2% target.

The markets are now pricing in over a 65% chance of a September rate hike, up from around 36% before his remarks, a significant shift in expectations.