Gold Prices Fall as US Inflation Fuels Rate Hike Bets

Global gold prices fell below $4,300 per ounce on Monday, marking a third consecutive weekly decline. The drop follows U.S. Labor Department data showing August core inflation rose 0.3%, with annual inflation reaching 3.4%. These figures have led traders to price in an 86% to 90% probability that the Federal Reserve System will implement its first interest rate hike in three years during its September 15-16 meeting.

Market pressure intensified as Brent crude oil prices climbed toward $108 per barrel. This surge was driven by geopolitical instability in the Middle East, including Houthi drone attacks that forced the Government of Saudi Arabia to close its East-West pipeline, the seizure of Yemeni ports, and a strike on a merchant vessel in the Strait of Hormuz that left one dead and three injured. While geopolitical conflict typically boosts gold's safe-haven appeal, the resulting energy-driven inflation has strengthened the case for central bank tightening, reducing the attractiveness of non-yielding assets.

Beyond the U.S., the Bank of Japan is widely expected to raise rates on Friday, and the European Central Bank has indicated potential hikes if energy costs continue to drive inflation. Despite the current sell-off, some financial institutions maintain bullish long-term outlooks. Goldman Sachs forecasts gold will reach $4,900 per ounce by the end of 2026, while the Australia and New Zealand Banking Group Limited maintains a 12-month target of $5,400 per ounce.