Gold Retreats from Record Peaks as CPI Inflation Data Looms

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Gold prices retreated from record highs on Wednesday in Asian trading, pressured by a rise in Treasury yields after Federal Reserve Chairman Jerome Powell indicated that the central bank wasn’t in a rush to cut interest rates. Traders remained focused on the U.S. dollar ahead of upcoming U.S. consumer price index (CPI) data, which is likely to influence future rate expectations.

Despite the pullback, gold reached new record highs earlier in the week, driven by increased risk aversion following U.S. trade tariffs under President Donald Trump. The tariffs, which included 25% duties on steel and aluminum, and threats of reciprocal tariffs, heightened demand for safe-haven assets like gold. Additionally, Trump’s comments on the Israel-Hamas conflict fueled further uncertainty. Gold surged to $2,943.25 an ounce on Tuesday before falling 0.4% to $2,887.02 an ounce in spot trading, and gold futures for April dropped 0.7% to $2,912.74.

The main pressure on gold came from a jump in Treasury yields, particularly the 10-year rate, which crossed the 4.5% mark after Powell's comments. He explained that the Fed’s cautious stance on rate cuts was due to persistent inflation, a resilient U.S. economy, and uncertainty around the inflationary impacts of Trump’s policies. Powell's testimony to the Senate echoed the Fed’s recent decision to keep rates steady.

This spike in Treasury yields dampened interest in non-yielding assets like gold, as higher rates increase the opportunity cost of holding such assets. However, gold’s strong rally over the past week kept it well above its earlier levels.

Other precious metals also saw declines, though less pronounced than gold. Platinum futures held steady at $1,037.45 an ounce, while silver futures slipped by 0.2% to $32.252 an ounce. In the industrial metals sector, copper futures rose slightly by 0.1%, while March copper futures fell by 0.1%.

Market attention now shifts to Powell’s upcoming testimony before Congress and the CPI data release later in the day. The CPI print is expected to show little change from December, with Goldman Sachs forecasting that core CPI, which excludes volatile items, will come in slightly above consensus.

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