XAU/USD Retreats Following US Inflation Data

Gold prices experienced a decline following the release of US Consumer Price Index (CPI) data. This unexpected move suggests that investors are now less confident in the Federal Reserve (Fed) cutting interest rates by 50 basis points (bps) at its upcoming meeting. Instead, the market is increasingly anticipating a more modest 25 bps rate reduction.

The US CPI data showed that headline inflation remained unchanged, while core inflation, excluding food and energy, rose slightly. This unexpected development caused US Treasury yields to rise, putting pressure on the non-yielding gold. Additionally, a stronger US Dollar further weighed on gold prices. Spot gold was seen trading %2,511.67 per ounce.

Despite the recent decline, gold prices remain supported by several factors. The precious metal continues to be seen as a safe-haven asset, offering protection against economic uncertainty and inflation. Gold’s historical role as a store of value and medium of exchange also contributes to its appeal.

Technical factors suggest that gold prices are currently consolidating in a range. While the overall trend remains bullish, there is a lack of clear direction in the short term. If gold prices can break above the recent all-time high of $2,531, further gains could be expected. However, a break below $2,500 could signal a potential short-term reversal.

The looming Fed meeting will be a crucial event for gold investors. If the central bank delivers a 25 bps rate cut, gold prices could see a renewed rally. However, if the Fed surprises the market with a bolder rate cut, gold could face additional downward pressure.