Gold price extends loss as US inflation data reinforces Fed caution

Spot bullion whipsawed as traders digested the data print, before trading down 1% at $2,161.14 an ounce as of 9:54 a.m. in New York. Gold hit an all-time high of $2,195.15 on Friday.

“The February CPI came in hotter than expected,” said Bart Melek, global head of commodity strategy at TD Securities. “The implication is that the Fed may not be ready to cut rates just yet.”

The Fed’s long-anticipated pivot to looser monetary policy is widely expected to boost gold’s appeal compared with yield-bearing assets like bonds. Policymakers have said they needed to see more evidence that inflation is headed toward its 2% target before lowering borrowing costs.

Swap markets now showed a 63% chance of a rate reduction in June, a tad higher than 61.8% the day prior to the February CPI readings.

“Mild inflation is still supportive as the market believes the Fed will still cut in June as this print is not bad enough to derail that view,” said Nicky Shiels, head of metals strategy at Geneva-based MKS PAMP SA.

The precious metal has jumped sharply this month, setting a series of new record highs. However, the scale and speed of gold’s ascent have surprised many seasoned market observers, without a clear justification for the sudden rally.

Still, bullion has been underpinned by long-standing supports, including massive purchases by central banks in emerging markets, led by China. Heightened geopolitical risks, with Middle East tensions from Gaza to the Red Sea and Russia’s war in Ukraine, have also underlined gold’s appeal as a haven asset.

Copper and most other base metals also declined after the CPI data. Copper was down 0.3% at $8,628 a ton on the London Metal Exchange as of 1:55 p.m. local time.