Gold (XAU/USD) erases earlier gains on Thursday after the non-yielding metal hit $4,374 and approached the all-time high of $4,381 following the release of a weaker-than-expected inflation report in the US. At the time of writing, XAU/USD trades at $4,335.
Bullion retreats as markets question inflation data reliability, keep January Fed cut odds unchanged.
The core US Consumer Price Index (CPI) print in November fell to its lowest level since early 2021, according to the US Bureau of Labor Statistics (BLS). Both headlined and core CPIs dipped, but economists warned that the 43-day government shutdown could distort some of the data that BLS workers compile for the release.
As inflation eased, expectations that the Fed could cut rates should rise, but traders took the data with a pinch of salt because the jobs data was solid, as the Department of Labor revealed in the latest Initial Jobless Claims report.
Expectations that the Fed will cut rates at the next meeting on January 28 remain unchanged at 24%, according to Capital Edge Rate probability data. Nonetheless, for the full year ahead, investors have priced 60 basis points of easing, with the first cut expected in June.
This should keep the US Dollar pressured and a tailwind for Bullion prices.
Meanwhile, easing geopolitical tensions could cap Gold's advance as talks between the US and Russia are set to resume during the weekend in Miami, according to Politico.
Ahead, the US economic docket will feature the release of the Fed's favorite inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, along with the University of Michigan Consumer Sentiment Index for its final release.
Source: Fxstreet
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