Gold prices fell from record highs on Wednesday as the U.S. currency and Treasury yields firmed following stronger-than-expected inflation tempered prospects of an early rate decrease.
Spot gold slipped 0.7% to $2,335.99 per ounce at 2:25 p.m. ET (1825 GMT). US gold futures fell 0.6% to $2,348.4. The report sent the U.S. dollar index (.DXY) up 1% and Treasury yields up, making non-yielding metal less appealing.
The Labor Department reported a 0.4% monthly CPI increase in March, compared to the 0.3% forecast by Reuters economists. "Strong employment and elevated CPI are interfering with the Fed's rate-cut plans, but gold, like inflation, remains cheeky," said New York independent metals trader Tai Wong.
According to the March 19-20 Federal Reserve minutes, officials fretted that inflation momentum had halted, necessitating a lengthier period of tight monetary policy.
"The minutes indicate that the committee would lower rates if the economy went as planned. However, inflation is expected "Wong said. As interest rates rise, bullion's appeal as an inflation hedge fades. Bullion prices peaked at $2,365.09 on Tuesday.
"Escalating geopolitical risks significantly bolster gold as hot and cold conflicts, and a record number of elections this year, keep the risk thermometer high," HSBC stated. It forecasts gold prices to trade between $1,975 and $2,250 in 2024.
Wall Street's main indexes fell on Friday, following a week of higher-than-expected inflation and jobs data that shifted investors' interest rate decrease expectations.
"Gold demand has been very strong this year buoyed by central bank buying, particularly non-western banks have been buying gold to diversify their foreign exchange reserves away from the U.S. dollar and a volatile Chinese currency," Will Rhind, CEO of GraniteShares. Silver dipped 0.4% to $28.04 per ounce after touching a near three-year high on Tuesday. Platinum dropped 1.5% to $964.35 and palladium 4.1% to $1,047.92.
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