Persistent US inflation and rising Treasury yields weigh on XAU/USD as traders delay Fed rate cut expectations until late 2024.
Gold (XAU/USD) retreated 0.25% to near $4,700 on Wednesday, pressured by a stronger US Dollar (USD) and reduced bets on Federal Reserve rate cuts. The shift follows April’s Consumer Price Index (CPI) rising to 3.8% YoY, exceeding forecasts and marking the highest reading since May 2023.
Markets now price in a 33% chance of a Fed rate hike by December, up from near zero earlier this year, according to the CME FedWatch tool. Higher Treasury yields have diminished gold’s appeal as a non-yielding asset, while Middle East supply disruptions continue to stoke inflation concerns.
Investors await US Producer Price Index (PPI) data for further clues on the Fed’s policy trajectory. Gold has struggled since the US-Iran conflict escalated, with the higher-for-longer rate outlook capping gains.