In a late North American session on Tuesday, gold prices experienced a sharp decline in the aftermath of a US inflation report that surpassed expectations, triggering a surge in US Treasury bond yields. The yellow metal tumbled more than 1%, with XAU/USD trading at $2,157.00 per troy ounce after reaching a high of $2,184.76.
The US Consumer Price Index (CPI) for February surpassed estimates, registering a year-over-year (YoY) inflation rate of 3.2%, exceeding January’s 3.1%. The monthly data also increased from 0.3% to 0.4%, in line with expectations. The core CPI, measuring underlying inflation, stood at 3.8% YoY, slightly down from 3.9%, but missed the consensus of 3.7%. The monthly readings remained unchanged at 0.4%.
In response to the data, US Treasury yields rose, with the US 10-year benchmark note rate gaining five basis points to reach 4.151%. The US Dollar Index (DXY), tracking the Greenback’s performance against a basket of six other currencies, also experienced a gain of 0.18%, reaching 102.92.
The hotter-than-expected inflation report fueled speculation about the Federal Reserve potentially taking a more hawkish stance, leading to the increase in bond yields and strengthening the US dollar. Consequently, gold, which is sensitive to interest rate movements and often seen as a hedge against inflation, faced selling pressure in the wake of the data release. Investors will closely monitor further economic indicators and the Federal Reserve’s communication for insights into future monetary policy decisions and their impact on gold prices.
