NEW YORK: Gold prices fell more than 1% as the dollar jumped after an unexpected rise in August consumer prices cemented bets for aggressive rate hikes from the US Federal Reserve.

Spot gold prices fell 1.1% to $1,705.94 per ounce by 11:04 a.m. ET (1504 GMT).

US gold futures fell 1.3% to $1,717.30.

“Gold has gapped lower on higher-than-expected CPI, with 75 basis points now definitely confirmed. The USD is surging and may continue to pressure gold,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

“Gold is likely to hold the $1,690-1700 range in the short term with the USD unlikely to make new highs unless there’s a very hawkish Fed result next week. It’s likely though they will wait and see as the meeting after that is in November,” Wong said. Monthly U.S consumer prices unexpectedly rose in August as declining gasoline prices were offset by gains in the costs of rent and food.

The dollar index rose 1%, making gold more expensive for overseas buyers.

“All in all, this basically points to continued work from the FOMC to bring inflation under control,” said Ole Hansen, head of commodity strategy at Saxo Bank. Markets now see an 81% chance of a 75-basis-point rate hike by the Fed at its Sept. 20-21 meeting.

Although gold is considered a hedge against inflation, rising US rates increase the opportunity cost of holding bullion.

Spot silver fell 1.2% to $19.55 per ounce, having recorded its biggest one-day percentage gain since February 2021 on Monday.

“Following a ferocious short squeeze in silver, with 54% of silver’s demand tied to fabrication, silver also remains highly sensitive to our deteriorating gauge of commodity demand,” TD Securities said in a note.