Gold prices declined as the latest U.S. economic data revealed an acceleration in inflation driven by higher energy and food prices, diminishing expectations for monetary easing by the Federal Reserve this year.
Bullion for immediate delivery fell as much as 2.1% after the Bureau of Labor Statistics reported that the consumer price index recorded its largest increase since 2023. Renewed inflation concerns pushed bond yields higher, with traders increasing bets that the Fed might raise interest rates by December. Higher rates typically weigh on gold, as the metal does not pay interest.
Gold has experienced a volatile year, reaching a record high in late January before giving back some of those gains. The precious metal has faced challenges since the outbreak of the Middle East conflict, as elevated oil prices fueled worries that central banks might maintain or even raise interest rates to contain inflationary pressures.
According to Christopher Wong, a strategist at Oversea-Chinese Banking Corp., gold's price action underscores that it is still trading less like a straightforward safe haven and more as a macro risk proxy caught between oil, inflation, Fed policy expectations, U.S. dollar dynamics, and risk sentiment.
Spot gold dropped 1.4% to $4,669.46 an ounce as of 12:28 p.m. in New York. Other precious metals including silver, platinum, and palladium also declined. The Bloomberg Dollar Spot Index rose 0.4% during the same period.
