Gold Tumbles as Fed Rate Hike Expectations Soar to 86%

Gold started the week on a bearish note due to expectations of a Federal Reserve (Fed) interest rate hike. The precious metal trades around $4,295, down 1.23% on the day and its lowest level since August 7. This price action is driven by market sentiment ahead of the Fed's two-day monetary policy meeting starting on Tuesday.

The US Consumer Price Index (CPI) report released last Friday showed that headline CPI rose 0.4% MoM in August, accelerating from 0.1% in July. Core CPI increased 0.3% during the same period, up from 0.2%. This data cemented the case for a quarter-point rate increase this week.

The CME FedWatch Tool now prices in an 86% probability of a rate hike, up from around 59.4% a week ago. Rising oil prices are also reinforcing expectations of a hawkish Fed outcome as conflict in the Middle East continues to escalate.