The drop in yields follows Tuesday’s data showing wholesale prices rose less than expected, easing fears of renewed inflation. However, markets remain cautious ahead of Wednesday’s consumer price index (CPI), which is expected to post an annual increase of 2.9%.
What will CPI data reveal about Fed policy?
The CPI report, due at 1.30pm GMT, is the main economic release of the week and provides clarity on the Federal Reserve’s interest rate outlook. Softer inflation could strengthen the case for rate cuts later this year, a scenario that would likely support gold prices.
Conversely, a stronger-than-expected CPI print could limit expectations for rate cuts, boosting the dollar and government bond yields, which could weigh on gold. The Federal Reserve maintains a cautious stance, signaling no immediate interest rate adjustments despite resilient labor market data.
How does Trump’s second term add to gold’s appeal?
Complementing the market’s cautious tone, traders are keeping an eye on the upcoming inauguration of President-elect Donald Trump. His proposed tariffs could fuel inflation, further complicating the outlook for the Fed’s monetary policy. These uncertainties have increased the appeal of gold as a safe haven.