Mumbai, Sept 14 (NVI) Gold prices fell sharply today as markets increased bets that the US Federal Reserve could raise interest rates at its policy meeting this week, with stronger inflation and rising oil prices adding to expectations of tighter monetary policy.
Spot gold fell 1.3 per cent to USD 4,292 an ounce, slipping below the USD 4,300 mark, while US gold futures declined 1.4 per cent to USD 4,348.50.
The dollar also strengthened to its highest level in more than a week, adding further pressure on bullion for buyers using other currencies.
Markets are now pricing in an 89 per cent probability of a Fed rate hike this week, up from 67 per cent before last week’s inflation data. Goldman Sachs and HSBC have also forecast a 25 basis point increase at the Fed’s Tuesday-Wednesday meeting.
US consumer prices accelerated in August, while a key measure of underlying inflation recorded its largest increase in four months. The data has strengthened expectations that the Federal Reserve could maintain a hawkish stance on monetary policy.
Rising oil prices have added another complication for policymakers. Oil prices gained around 3 per cent on Monday after strikes targeted Saudi energy and civilian infrastructure. Iranian attacks on Gulf shipping also raised concerns over supply, while the closure of a key Saudi oil pipeline further tightened the supply outlook.
Higher interest rates tend to weigh on gold because the precious metal does not generate interest income, making it relatively less attractive compared with interest-bearing assets.
Other precious metals also declined. Spot silver fell 1.9 per cent to USD 63.22 an ounce, while platinum dropped 1.4 per cent to USD 1,770.82 and palladium declined 1.4 per cent to USD 1,280.97. (NVI)
