Gold climbs to $4,385.14 as Federal Reserve rate-hike probability hits 85%
U.S. spot gold rose 1.6% on Friday despite inflation data that fueled expectations for a Federal Reserve interest rate increase. Probability of the central bank raising rates in September climbed from 70% to 85% after Core CPI showed stubborn price pressures.
Gold prices rebounded over 1% on Friday, with U.S. spot gold rising 1.6% to $4,385.14 per ounce by 9:23 a.m. EDT. The metal found short-term support after recent losses, even as strong U.S. inflation data raised expectations of a Federal Reserve rate hike next week. Spot gold closed down only about 1% for the week, recovering rapidly after a brief dip following Thursday's decline. Traders are now pricing in an 85% chance of a 25-basis-point rate increase at the Fed's September 15-16 meeting, up from roughly 70% prior to the latest report. Probability of a December hike is also beginning to be priced into markets. The U.S. Bureau of Labor Statistics reported that Core CPI rose 0.3% in August from July, exceeding economists' expectation of a 0.2% increase. Headline consumer inflation advanced 3.4% over the 12 months through August. Independent metals trader Tai Wong noted that market volatility remained muted because prices had previously priced in a 70% chance of a hike. Core inflation excluding food and energy rose above expectations, adding to concerns regarding persistent price pressures.
