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Spot gold prices rose more than 1% on Friday as core inflation data bolstered expectations of a Federal Reserve rate hike.

Spot gold prices rose more than 1% on Friday, rebounding from recent losses to find a short-term floor. The price of gold reached approximately $4,385.14 per ounce, while gold futures gained 0.5% to $4,426.90. This price action followed the release of August Consumer Price Index (CPI) data, which showed a 3.4% year-over-year increase in consumer inflation. While headline inflation held in line with expectations, core CPI rose 0.3% on the month, exceeding forecasts of a 0.2% gain. These figures have increased market expectations for a Federal Reserve interest rate hike next week. According to the CME FedWatch Tool, the probability of a rate hike moved from 67% to 85% following the data. Higher interest rates typically diminish the appeal of non-yielding bullion, but the current inflation data cemented the case for a hike. Simultaneously, oil prices remained on a course for a weekly gain despite a slight Friday dip. Brent crude and WTI crude both traded above $100 a barrel, supported by escalating tensions between the U.S. and Iran. These geopolitical factors continue to provide a defensive demand for precious metals.

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