Gold prices traded steady at five-month highs during Thursday’s Asian trading session, as investors weighed softer-than-expected core inflation data ahead of the upcoming release of U.S. retail sales figures.
By 4:00 pm AEDT (5:00 am GMT) spot gold was up just $1.16 or 0.04% to US$2,697.42 per ounce.
The tame inflation data from the U.S. rekindled hopes for interest rate cuts by the Federal Reserve in 2025. This led to a lower U.S. dollar and easing Treasury yields, providing significant support for gold prices.
Market participants increased their bets on a potential Federal Reserve rate cut in June, reflecting renewed optimism for a second rate reduction in 2025.
Among data releases, U.S. consumer price index (CPI) figures met expectations with an annual rise of 2.9% in December, up from November’s 2.7%. However, core CPI, which excludes volatile food and energy prices, rose by 3.2%, missing forecasts of 3.3%.
Similarly, U.S. producer price index (PPI) data released on Tuesday indicated softer-than-expected inflationary pressures, with the annual PPI rising by 3.3% in December against a forecast of 3.4%, and core PPI climbing to 3.5% year-on-year, below market expectations of 3.8%.
The combination of dovish Fed expectations, optimism over potential Chinese economic stimulus, and waning concerns over U.S. President-elect Trump's trade tariff policies bolstered the risk-on sentiment, keeping the U.S. dollar subdued and pushing gold prices higher.
Looking ahead, market focus will turn to additional U.S. economic indicators, including December retail sales data and weekly jobless claims.
