Gold prices edged lower on Wednesday, with caution dominating the market as investors awaited the U.S. consumer price inflation (CPI) report, which could offer further insight into the Federal Reserve’s future interest rate policy.
Spot gold fell by 0.1%, trading at $2,672.76 per ounce by 0300 GMT, while U.S. gold futures saw a slight increase of 0.3%, reaching $2,689.70.
Market analysts are closely monitoring the CPI data, set to be released at 1330 GMT, following last week’s robust jobs report, which highlighted the strength of the U.S. economy. This prompted traders to scale back expectations for additional interest rate cuts by the Federal Reserve. Kelvin Wong, OANDA’s senior market analyst for Asia Pacific, noted, “If the CPI data comes in higher, it could push gold prices lower, as it would reinforce the view that the Fed may continue normalizing its dovish policy from 2024.”
Economists surveyed by Reuters have predicted a 2.9% annual rise in inflation for December, up from 2.7% in November 2024, with a 0.3% monthly increase.
Gold had gained earlier this week after data showed a rise in the U.S. producer price index for December, which boosted expectations that the Fed may continue with rate cuts in the coming months. However, traders have fully priced in a pause in rate cuts during the Fed’s January policy meeting.
As President-elect Donald Trump prepares to begin his second term next week, analysts are focusing on his economic policies, which are expected to contribute to inflationary pressures.
Gold, as a non-yielding asset, is often seen as a hedge against inflation, although higher interest rates tend to reduce its attractiveness. Wong added, “If gold prices fall below $2,600, the next significant support level would be around $2,540, which could present an attractive entry point for long-term investors.”
In other precious metals, spot silver dropped 0.3% to $29.81 per ounce, palladium slid 0.3% to $935.89, and platinum remained steady at $935.92.
Related topics:
- India Surpasses China in Gold Purchases, Buying 51% More in Three Months
- Gold Rates Skyrocket in Chennai on Diwali, 24K Gold Exceeds Rs. 81,000 Per 10 Grams
- Gold and Silver Prices Rise Across India on January 13, 2025
