Gold prices rebounded towards the US$5,000 level during Friday's Asian deals, recovering part of the sharp 3.2% decline in the previous session as investors turned their attention to the pivotal United States consumer price index (CPI) release.
By 3:30 pm AEDT (4:30 am GMT), spot gold was trading 1.3% higher at $4,987.76 per ounce.
The precious metal continues to find support at lower levels amid persistent geopolitical tensions and expectations that the U.S. Federal Reserve will begin cutting interest rates later this year.
Despite an upside surprise in January’s nonfarm payrolls report, markets are still pricing in at least two Fed rate cuts in 2026, according to the CME Group FedWatch Tool.
The upcoming CPI report is therefore seen as crucial in determining whether the Fed will validate market expectations for easing or adopt a more hawkish stance should inflationary pressures reaccelerate.
Markets are expecting U.S. core annual CPI to ease slightly to 2.5% in January from 2.6% in December. Core monthly CPI is forecast to rise 0.3%, compared with a 0.2% increase in the previous month. Headline annual inflation is also projected to moderate to 2.5% from 2.7%.
As noted by ANZ analysts, “an unexpected rise in inflation could reduce the Fed’s desire to cut interest rates further, making gold less attractive for investors”.
Such an outcome would likely bolster the U.S. dollar and weigh on non-yielding assets such as gold, potentially capping the metal’s recovery.
The U.S. dollar has steadied after earlier weakness this week, consolidating losses following a broad wave of market volatility triggered by concerns over AI-driven disruption, which expanded beyond the technology sector to include commercial property and other cyclical industries.
