International Gold Prices Fall 1.2% as Odds of U.S. Rate Hike Rise

[Financial News] International gold prices declined on the 14th (local time) as expectations grew that the U.S. central bank, the Federal Reserve (Fed), would raise its policy rate this week. The move was attributed to recently surging U.S. Consumer Price Index (CPI) figures and rising international oil prices, which have fueled the Fed’s tightening stance.
Spot gold was trading at $4,296.68 per ounce (31.1 grams) as of 12:16 p.m. GMT, or 9:16 p.m. on the 14th in Korea, down 1.2% from the previous day. The decline followed three consecutive weeks of weekly losses recorded through the 11th. On the New York Mercantile Exchange (NYMEX), U.S. gold futures also fell 1.7% to trade at $4,335.40.
The strength of the U.S. dollar, which reached its highest level in a week, also put downward pressure on gold prices, which are traded in dollars. A stronger dollar raises the cost of buying gold for holders of other currencies.
Giovanni Staunovo, an analyst at UBS, said, "The market has taken a Federal Reserve rate hike as a given since last week’s CPI release." He added, "A renewed rise in oil prices could also fuel inflation concerns and strengthen the Fed’s hawkish stance."
U.S. consumer prices, released earlier, accelerated in August, while core inflation posted its biggest increase in four months. Accordingly, the CME FedWatch Tool showed that the probability of market participants expecting a rate hike at the Federal Reserve’s Federal Open Market Committee (FOMC) meeting, which ends on the 16th, surged from about 67% before the inflation data was released to around 89%.
Major investment banks, including Goldman Sachs and HSBC, also revised their forecasts and now expect the Fed to raise its policy rate by 25 basis points at this week’s regular meeting. In addition, rising energy prices and instability in the Middle East have strengthened expectations that the Bank of Japan (BOJ) will also raise interest rates on the 18th.
[email protected] Yoon Jae-jun Reporter