Gold falls as US inflation data fuels Fed rate-hike bets
What's the story
The price of gold has witnessed a slight dip, following the release of hotter-than-expected US inflation data. The core consumer price index (CPI), which excludes food and energy costs, rose by 0.3% month-on-month in August. This has fueled speculation that the Federal Reserve may increase interest rates later this week to combat rising inflation.
Market reaction
Gold was trading near $4,340 per ounce
In response to the inflation data, gold was trading near $4,340 per ounce after after falling for a third week.
The latest inflation print puts pressure on the Fed to raise rates for the first time in three years during its upcoming meeting.
Traders are now betting on an 88% chance of a rate hike this September.
Higher borrowing costs usually hurt gold prices as they don't yield interest.
Political implications
Fed's potential rate hike could draw Trump's criticism
The Fed's potential decision to tighten monetary policy could draw criticism from President Donald Trump, who has been vocal about his desire for lower rates. The central bank's stance in recent weeks has frustrated him further.
Meanwhile, escalating conflict in the Middle East has pushed oil prices higher, adding more pressure on inflation.
Brent crude oil prices rose toward $107 per barrel after surging nearly 9% last week.
Future outlook
Gold has been trading in a narrow range around $4,400
Gold has been trading in a narrow range around $4,400 since bouncing off a floor near $4,000 per ounce in July.
This is due to traders constantly reassessing the Fed's policy outlook.
Despite short-term challenges, many investors are betting that bullion will rise as it regains its traditional role as a portfolio hedge.