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Gold was down 0.3% on Wednesday after 12:30 p.m. GMT, losing $2,510 per ounce.
Gold’s losses come despite the US Consumer Price Index growing at its slowest pace in more than three years.
The annual and monthly readings of the headline index came in at expectations, which had already been reflected in prices, which may justify profit-taking on Wednesday.
Inflation grew by 2.5% year-over-year and 0.2% month-over-month. Core inflation accelerated by a stronger-than-expected 0.3% month-over-month, as service prices accelerated for the second straight month, according to the Bureau of Labour Statistics.
These figures did not significantly change market expectations about the pace of interest rate cuts by the Federal Reserve this year. The most likely scenario is for the Fed to cut rates by 25 basis points next week with an 85% probability, and the cuts could extend to 1.25 basis points by the end of the year with a probability of about 95% according to the CME FedWatch Tool.
All of this data was reflected in the recovery of short- and long-term Treasury bond yields, which could put pressure on gold.
Also, I believe that the market response of reducing the probability of a cut by half a percentage point after a week means that the next interest rate cuts will be in light of declining inflation and not to save the economy from recession. This is because the hypothesis of a rapid cut contributed to gold’s gains by feeding economic uncertainty, and its fading could mean that these concerns will subside – even with the negative signs from the labour market.
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