Gold Slides as Strong PPI Fuels Fed Rate Hike Bets

Gold fell to around $4,350 an ounce on Thursday as traders increased bets on a Federal Reserve rate hike next week following stronger-than-expected US producer price data. US PPI rose 0.4% in August, while annual producer inflation accelerated to 5.4%, above the 5.3% forecast, reflecting a surge in energy prices, alongside signs of greater cost pass-through across broader sectors. The data coincided with a fresh rally in oil prices amid escalating US-Iran strikes in the Middle East, prompting investors to price in a more than 70% probability of a Federal Reserve rate hike on September 16. Meanwhile, traders also raised bets on further ECB tightening after the central bank delivered an expected rate hike and warned that inflation risks remained tilted to the upside.

Gold rose above $4,400 an ounce on Thursday, extending gains from the previous session as investors awaited key US inflation readings that could provide further insight into the Federal Reserve’s next policy move. The US producer price index report for August is due later today, followed by the consumer inflation report on Friday. The metal found support from a weaker dollar, as well as continued demand for its long-term hedging appeal despite near-term pressure from higher oil prices and bond yields. Oil prices climbed to multi-month highs as the US-Iran conflict intensified, stoking inflation concerns and strengthening expectations for near-term rate hikes. US Treasury yields also moved higher after the Treasury Department announced plans to buy back up to $6 billion in longer-term debt, disappointing some investors who had expected a more substantial increase.

Gold rose above $4,390 an ounce on Wednesday, supported by a weaker US dollar as investors assessed renewed inflation risks from escalating Middle East tensions and awaited key US inflation data for clues on the Federal Reserve’s policy outlook. The dollar slipped to a four-month low, with investors looking ahead to producer-price data due Thursday and the consumer price index on Friday. The releases could provide the final major input into expectations for the Fed’s policy decision on September 16. Meanwhile, oil prices surged to their highest level in more than three months as US-Iran tensions intensified. Iran’s Revolutionary Guard said it had fired ballistic missiles at a US-used military base in Jordan and attacked 10 ships on Wednesday, after Washington said it had destroyed five Iranian oil tankers. Markets are now pricing in around a 60% chance of a Fed rate hike at next week’s policy meeting.