Gold flat as investors strap in for aggressive U.S. rate hike

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Gold prices were flat on Wednesday,

after falling more than 1% in the previous session, as

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surprisingly stronger U.S. inflation data fueled expectations

that the Federal Reserve will continue hiking interest rates

aggressively and bolstered the dollar.

Spot gold was flat at $1,701.70 per ounce as of 0331

GMT. Prices saw their biggest one-day percentage decline since

July 14 on Tuesday.

U.S. gold futures were down 0.4% at $1,710.40.

The stronger-than-anticipated numbers have “cemented the

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likelihood for a jumbo-sized rate hike at the (Fed) meeting that

we’re going to see next week,” said DailyFX currency strategist

Ilya Spivak.

A hawkish FOMC could prompt gold to significantly shift

lower, even below the $1,600 figure, Spivak said.

U.S. Labor Department data showed on Tuesday the headline

Consumer Price Index edged up 0.1% last month versus

expectations for a 0.1% decline, while core inflation surged

0.6%.

The data has stoked expectations that the Fed could raise

U.S. borrowing costs faster and further than previously

expected.

Nomura’s economists said they now believe a 100 basis-point

rate hike is the most likely outcome at the Sept. 20-21 meet.

The dollar index , which measures the currency against

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six major peers, was steady after recording its biggest one-day

percentage gain since March 2020 overnight.

Benchmark U.S. Treasury yields hovered close to

a near three-month peak touched on Tuesday.

Even though gold is seen as a hedge against inflation,

higher interest rates increase the opportunity cost of holding

the bullion while boosts the dollar, in which the precious metal

is priced.

Spot silver dipped 0.2% to $19.28 per ounce and

platinum rose 0.5% higher to $880.67.

Palladium fell 0.8% to $2,088.36, having fallen 7.1%

in the previous session its biggest one-day percentage drop

since June 13.

(Reporting by Eileen Soreng in Bengaluru; editing by

Uttaresh.V)