Gold Retreats as Investors Weigh Fed Policy After Soft US Inflation Data

Gold prices pulled back on Thursday after briefly moving close to record highs, as traders reassessed how much weight to place on the latest soft U.S. inflation figures. While easing inflation typically supports non-yielding assets, uncertainty around data accuracy and unchanged expectations for near-term Federal Reserve rate cuts prompted investors to lock in profits.

The precious metal reversed earlier gains and traded around $4,335 after bouncing from intraday lows near $4,308. The move highlights growing caution in the market, even as broader conditions remain supportive for bullion over the medium term.

Inflation Data Raises Questions, Fed Outlook Steady

The U.S. Consumer Price Index for November fell to its lowest level since early 2021, according to the Bureau of Labor Statistics. Both headline and core inflation readings cooled, reinforcing the narrative that price pressures are easing. However, economists have flagged potential data distortions caused by the recent 43-day U.S. government shutdown, which may have affected data collection.

As a result, traders treated the CPI report cautiously. Strong labor market data further tempered expectations for aggressive policy easing. Initial jobless claims declined more than expected, signaling ongoing resilience in employment and reducing pressure on the Fed to move quickly.

Market pricing shows little change in expectations for a January rate cut, which remains around 24%. Over the full year, investors are still factoring in approximately 60 basis points of easing, with the first cut more likely around mid-year. This outlook has kept the U.S. dollar relatively soft, offering continued support for Gold prices.

Gold Market Drivers and Technical Outlook

Beyond monetary policy, other factors are shaping price action. Physical demand has softened, with Swiss customs data showing a sharp decline in bullion exports to India due to elevated prices, while shipments to China increased. Meanwhile, U.S. Treasury yields and real yields have continued to fall, a traditionally favorable backdrop for Gold.

Geopolitical developments could also influence direction. Reports of renewed diplomatic talks between the U.S. and Russia may ease safe-haven demand in the short term, potentially limiting upside momentum.

From a technical perspective, Gold appears to be consolidating after failing to break above the $4,381 record high. Momentum indicators suggest buying pressure is easing. A daily close below $4,350 could open the door to support near $4,300, followed by $4,285 and $4,250 if selling pressure intensifies.

Despite the pullback, Gold remains well supported by macroeconomic uncertainty, a weaker dollar, and declining real yields, keeping its broader outlook constructive.

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