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Gold prices (XAU/USD) declined after posting early gains on Thursday, with the precious metal hitting $4,374 and close to breaking an all-time high of $4,381 following a weaker-than-expected inflation report in the United States.
At 9:30 a.m., gold was at $4,312, down 0.45% since it opened early Friday in Asian trading.
The core U.S. Consumer Price Index (CPI) for November fell to its lowest level since early 2021, according to the U.S. Department of Labor Statistics (BLS). Both the headline and core CPIs fell, but economists warned that the 43-day government shutdown could affect some of the data collected by the BLS for the report.
The drop in inflation has raised expectations that the Federal Reserve (Fed) may cut interest rates, but investors are taking the data with caution as employment data remains strong, as reported by the Labor Department in its latest Initial Jobless Claims report.
The expectation of a Fed rate cut at its next meeting on January 28 remains at 24%, according to rate probability data from Capital Edge. However, over the course of the year, investors have been expecting a 60 basis point cut, with the first cut expected in June.
This situation is expected to put pressure on the US Dollar and thus be a positive factor for gold prices.
In addition, the easing of geopolitical tensions may limit gold prices' gains, as talks between the US and Russia are scheduled to resume this weekend in Miami, according to a Politico report.
Going forward, market attention will be focused on the release of the Fed's preferred inflation index, the Core Personal Expenditures (Core PCE) Price Index, as well as the University of Michigan Consumer Sentiment Index, which will be released for the last time.
