Gold Pressured Ahead of US Inflation data

Gold price is still pressured around the lowest levels in five weeks. Markets preparations for United States Consumer Price Index for January weigh on the Gold Index amid apparently hawkish remarks by Fed policymakers and gtold price naturally reacts to this hawkish language.

Gold price is able to resists and holds lower ground at the monthly bottom surrounding $1,855, at the time of writing, the previous metal is trading at $1,854.51 following the slump to early January levels the previous day, as markets are getting prepared for the US CPI data for January.

The US dollar’s pullback contributes to the decline of gold price, as well as the firmer sentiment. However, hawkish comments by Fed officials and firmer US inflation expectations seem to keep the Gold bears hopeful ahead of the key data.

Fed officials defend the rate hikes and are far from suggesting the policy pivot, which in turn keeps the market’s fears of tighter monetary policy actions moving forward and the same weighs on gold price. Fed Governor Michelle Bowman said on Monday that the Federal Reserve will need to continue to raise interest rates in order to get them to a level high enough to bring inflation back down to the central bank’s target rate, per Reuters.

Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”  His comments were mostly in line with Fed Chair Jerome Powell’s cautious optimism and exerted downside pressure on the US Dollar.

Although the market forecasts hint at the easing of the United States Consumer Price Index (CPI) for January to 6.2% YoY from 6.5%, the US inflation expectations remain firmer around the monthly highs and underpin the hawkish Fed bias. That said, the US inflation expectations per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) remain firmer around the monthly highs, close 2.31% and 2.44% at the latest. The University of Michigan also lifted its one-year ahead inflation projections while keeping the five-year forecasts intact.

It should be noted that the US dollar retreated from a one-week high on Monday, sidelined near 103.30 by the press time, as traders prepare for the key US data. While the softer sentiment and the US Dollar’s pullback should put a floor under the Gold price, the metal failed to cheer any of it and remained depressed near the five-week low.