(Bloomberg) — Gold edged lower, after hotter-than-expected US inflation data raised prospects that the Federal Reserve will hike interest rates later this week.
Bullion was trading near $4,340 an ounce, after falling for a third week. Underlying inflation rose in August as the core consumer price index, which excludes food and energy costs, increased 0.3% from a month earlier, data released Friday showed. Gold ended that session higher but was still down 1.8% for the week.
The latest inflation print piles pressure on the Fed to make its first rate hike in three years when it meets this week. Traders are pricing in a roughly 88% chance of an increase in September. Higher borrowing costs are typically negative for gold, which doesn’t pay interest.
However, by tightening monetary policy, the Fed could risk attract the ire of President Donald Trump, who reiterated calls for lower rates on Sunday after voicing growing frustration with the central bank’s stance in recent weeks.
With conflict in the Middle East continuing to escalate, oil prices surged again, adding inflationary pressure. Brent rose toward $107 a barrel, after rallying almost 9% last week. A meeting planned for Monday between Iran and several Gulf nations to create a temporary shipping lane through the Strait of Hormuz was postponed, leaving efforts to increase shipments through the critical waterway in limbo.
Gold has traded in a relatively narrow range either side of $4,400 since bouncing from a floor near $4,000 an ounce in July, as traders repeatedly recalibrate the outlook for Fed policy. Despite the near-term headwinds, many investors are still betting that bullion will grind higher as it rediscovers its traditional value as a portfolio hedge.
Spot gold was down 0.2% at $4,339.96 an ounce at 8:30 a.m. in Singapore. Silver fell 0.8% to $64 an ounce. Platinum and palladium also declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, was marginally higher.
–With assistance from Wendy Wells.
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