Gold prices retreated slightly after touching an all-time high of $4,635 following the release of the December US inflation report which confirmed that it was under control, giving indications that the next Fed interest rate cut is imminent.
At 9.15 am, gold prices were at $4,615, up 0.66% since it opened early Wednesday in Asian trading.
However, the US dollar remained strong and continued to threaten gold’s position in daily trading on Wednesday as the Consumer Price Index (CPI) report showed a reading that met market expectations.
Core Inflation and Headline Inflation were seen as stable, with both unchanged from the previous reading.
Other data also revealed improving labor market conditions, while St. Louis Fed President Alberto Musalem took a neutral to aggressive tone in his latest speech.
Money markets have now set expectations for a 50 basis point interest rate cut by the end of the year, according to Prime Market Terminal.
Over the weekend, the Justice Department's indictment of Fed Chairman Jerome Powell was seen as a threat to the Federal Reserve's independence and could potentially reduce the chances of a rate cut at its next January meeting.
Meanwhile, ongoing tensions in the Middle East continue to add to geopolitical risks, thus becoming a drag on gold price movements.
US President Donald Trump announced the implementation of 25% tariffs on countries doing business with Iran, thus increasing pressure on China and Russia, Iran's two main trading partners.
Market attention will next turn to US economic data, including the release of the Producer Price Index (PPI) for October and November, the November Retail Sales data, as well as speeches by several Fed officials throughout the rest of the week.
