Gold prices saw a modest recovery during Wednesday’s North American trading session. The rise came as inflationary pressures intensified, and Federal Reserve Chair Jerome Powell emphasized the need for restrictive monetary policies.
Inflation and Fed Policies Impact Gold Price
The US Bureau of Labor Statistics reported inflation rising above 3%, signaling prolonged Fed restraint. This development has influenced market expectations, with traders adjusting their forecasts for rate cuts.
Initially, December fed funds rate futures indicated 40 basis points of easing. However, post-CPI data, expectations were revised to just 30 basis points by year-end.
US Treasury Yields and Dollar Dynamics
US Treasury yields and the Greenback initially reacted positively to the CPI data. However, the US Dollar Index (DXY) later lost momentum, stabilizing at 107.98.
Fed Chair Jerome Powell reiterated that inflation control remains incomplete. Atlanta Fed President Raphael Bostic echoed this sentiment, projecting a 2% inflation target by 2026.
Market Movers: Gold Price Rally and US Yields
The US 10-year Treasury bond yield increased by 9.5 basis points to 4.635%. Real yields, inversely correlated with gold prices, surged to 2.157%, creating headwinds for XAU/USD.
Core CPI, excluding volatile items, rose by 3.3% year-over-year, exceeding forecasts. This underscores the Federal Reserve’s ongoing challenges in managing inflation.
Central Bank Demand for Gold
Central banks have significantly increased gold purchases, with the World Gold Council reporting over 1,000 tons bought in 2024. Post-Trump’s election, purchases surged by 54% year-over-year to 333 tons.
Technical Outlook for Gold Prices
Gold prices hovered around $2,900, showing potential for further gains. Despite hot CPI data, XAU/USD remained stable, with the Relative Strength Index (RSI) indicating consolidation.
Key resistance levels include 2,950and2,950and3,000, while support lies at 2,850and2,850and2,730.
Conclusion
Gold price advances as US CPI heats up, reflecting market reactions to inflation and Fed policies. For more insights on gold trends, visit Daily Gold Signal. Explore daily updates on gold prices here.
