Gold prices took a hit on Wednesday as strong US inflation data raised concerns that the Federal Reserve may keep interest rates high for longer. Despite a late-day recovery, gold remained under pressure overall. At 09:02 ET (13:02 GMT), spot gold was down 2.5% at $4,152.81 per ounce.
The US Consumer Price Index (CPI) showed prices rose 0.5% month-on-month in May, matching market expectations. On a yearly basis, inflation stood at 4.2%, matching what experts had anticipated.
After the inflation data was released, US Treasury yields fell slightly and the US dollar became weaker. When the dollar is strong, gold becomes more expensive for buyers in other countries, which can reduce demand and lead to lower gold prices.
The Fed rate hike fears have been rising, with traders expecting possible US interest rate hikes this year. Spot gold dropped 1.5% to $4,264.70 per ounce and had touched its lowest level since March 23 before slightly recovering.
Market expert Bob Haberkorn said traders were nervous and many markets moved into 'risk-off' mode, which pulled gold prices down. Investors are now focused on upcoming inflation reports like CPI and Producer Price Index (PPI) for more clues on future Fed decisions.
