Gold prices react to U.S. inflation report, eyes on Federal Reserve meeting

Gold prices faced selling pressure yesterday in response to the U.S. inflation report, which closely aligned with market expectations.

The highly anticipated report provided a mixed outlook for the United States. While overall inflation cooled to a 4% annual rate, the lowest in over two years, the slightly higher core CPI number raised concerns. The core CPI, a key indicator for the Federal Reserve as it excludes volatile food and energy prices, showed a pace of 5.3%. Although slightly lower than the previous figure of 5.5%, it exceeded market consensus predictions.

Yesterday’s gold market performance has led to increased anticipation for the conclusion of the Federal Reserve meeting scheduled for later today, as investors seek further cues.

The outcome of the Fed meeting is highly anticipated and expected to shed more light on the future of the yellow metal. The potential pause in future rate hikes is considered a positive factor for gold. However, concerns loom regarding the increased pressure on gold resulting from heightened risk appetite. Additionally, analysts have cautioned that the Federal Reserve might still decide to raise interest rates, considering that U.S. inflation levels remain well above the central bank’s desired target range of 2%.

Regardless of the Federal Reserve’s decision at the conclusion of the meeting, market expectations persist that U.S. rates will remain elevated for an extended period. This outlook poses limitations on the potential upside for gold throughout the year.

This morning gold (XAU/USD) has recovered some losses and is currently trading at $1,950.