Gold falls 2% as Fed rate hike bets rise
Spot gold dropped nearly 2% for the week after strong US producer price data boosted expectations for Federal Reserve interest rate increases.
Spot gold declined by nearly 2% for the week, settling at $4,351.97 per ounce on Friday. The metal is on track for a third consecutive weekly loss. This downturn occurred despite a 0.8% intraday gain earlier in the session.
US gold futures for December delivery also weakened, falling 0.3% to $4,393.10. The decline followed the release of August Producer Price Index data. This report showed a 0.4% rise in final demand prices.
Inflation data drives rate expectations
The August PPI print exceeded the revised 0.1% gain recorded in July. Traders responded by increasing bets on a Federal Reserve rate hike at next week's meeting. This shift in market sentiment pressured gold prices immediately. A higher interest rate environment reduces the appeal of non-yielding assets like precious metals.
Wael Makarem of Exness noted that a strong consumer price inflation report could further strengthen the case for multiple rate increases. Such a scenario would likely push Treasury yields and the US dollar higher. Both factors typically place additional downward pressure on gold prices. The consumer price report was due at 1230 GMT.
Geopolitical tensions support other metals
Middle East tensions continued to influence market dynamics. Iran-aligned Houthis seized control of Yemen's port city of Mocha. They also advanced down the Red Sea coast toward strategic islands. These events contributed to higher inflation expectations among investors.
Oil prices fell on Friday but remained above the $100-a-barrel mark for the week. This is the first time prices have held this level since mid-May. Spot silver rose 0.6% to $63.93 per ounce on Friday, though it slipped over 3% for the week.
Broader metal market performance
Platinum gained 1.2% to reach $1,798.63 per ounce. Palladium rose 1.4% to $1,299.91. Both metals are heading for weekly declines despite their Friday gains. The overall precious metals complex faced headwinds from rising interest rate probabilities. According to Gold (Google News), these financial shifts dominated the trading session.
