In the late North American session, gold prices experienced a 0.33% drop as traders eagerly anticipated Thursday’s release of the latest inflation report in the United States (US). The prevailing expectation is that headline inflation will surpass the previous month’s reading, a sentiment reflected in the ascent of US bond yields. The XAU/USD pair is currently trading at $2021.22, having reached a daily high of $2040.27.
The decline in XAU/USD is attributed to the impact of elevated US bond yields, particularly the 10-year benchmark note rate, which rose by two basis points to 4.034%. This influence persists despite a weakened US Dollar (USD).
Although market sentiment has turned positive, the high US Treasury bond yields are exerting downward pressure on gold prices.
Wednesday’s economic docket featured limited releases, with Wholesale Inventories posting a modest 0.2% decline as anticipated by economists. This marks a slight improvement compared to October’s -0.3% plunge. Traders are now bracing themselves for the upcoming release of the Consumer Price Index (CPI) figures in the US. The consensus projects the headline CPI at 3.3% for the 12 months to date, while the core CPI is expected to decrease to 3.8%.
Speculators are closely watching the data, as there is a prevailing belief that the US Federal Reserve (Fed) might cut rates by nearly 150 basis points by the year’s end. This anticipation follows comments from Fed Chairman Jerome Powell and Co., who suggested that rates are approaching their peak. Consequently, softer-than-expected US CPI readings could have a positive impact on XAU prices and a negative effect on the Greenback, as a decline in US Treasury bond yields is anticipated.
Conversely, a pickup in US inflation could catch traders off guard, especially considering the prevalent positioning for a dovish Fed.
Looking ahead, New York Fed President John Williams is scheduled to provide insights around 19:00 GMT. Traders will keenly observe his remarks for potential market implications.
