Gold Slips Ahead of US Inflation Data as Focus Turns to Federal Reserve Policy

Gold prices eased slightly on Wednesday as investors awaited the U.S. consumer price inflation (CPI) report, which is expected to provide crucial insights into the Federal Reserve's future interest rate moves.

Market Overview Spot gold fell 0.1% to $2,672.76 per ounce as of 0300 GMT, while U.S. gold futures rose 0.3% to $2,689.70.

“If the CPI data comes in higher, it could pressure gold prices lower as it reinforces expectations that the Fed may normalize its dovish policy stance from last year in 2025,” said Kelvin Wong, senior market analyst for Asia Pacific at OANDA.

Key Data and Predictions The CPI report, due at 1330 GMT, follows last week’s robust jobs data, which highlighted the resilience of the U.S. economy and led traders to significantly scale back expectations of further Fed easing. A Reuters poll projects an annual CPI increase of 2.9% for December 2024, up from 2.7% in November, alongside a 0.3% monthly rise.

Gold’s rally earlier this week was supported by data showing an annual rise in the producer price index (PPI) for December, which slightly bolstered hopes for continued Fed rate cuts in 2025. However, market participants have already priced in a pause at the Fed’s January policy meeting.

Technicals and Market Sentiment Wong highlighted that if gold prices drop below the November range of $2,600, the next significant support level is around $2,540, a point he deems attractive for long-term investors.

Reuters technical analyst Wang Tao also predicted that spot gold could retreat to $2,635 based on current technical indicators.

Broader Context The inauguration of President-elect Donald Trump for his second term next week adds an additional layer of uncertainty. Analysts anticipate that Trump’s policy agenda could fuel inflationary pressures, a key factor influencing gold’s performance as a hedge against inflation. However, rising interest rates tend to undermine the appeal of non-yielding bullion.

Other Precious Metals Spot silver dipped 0.3% to $29.81 per ounce, palladium edged down 0.3% to $935.89, and platinum remained steady at $935.92.

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