Gold faces more headwinds as U.S. inflation threat remains

NEW YORK (January 30) Gold continues to see significant selling pressure and could face further headwinds as inflation in the U.S. remains persistent, with producer prices rising more than expected last month.

The headline Producer Price Index (PPI) rose 0.5% in December, following November’s 0.2% increase, the U.S. Labor Department announced Friday. The latest inflation data came in hotter than expectations, as economists had forecast a 0.2% rise.

Over the past 12 months, headline wholesale inflation increased 3.0%, the report said.

Core PPI, which strips out volatile food and energy costs, rose 0.7% last month—well above economists’ 0.2% consensus forecast—following November’s reading. Annual core PPI data suggests wholesale inflation is becoming embedded in the broader economy, with prices rising 3.3%; economists had expected an increase of 2.9%.

Gold has been struggling since Thursday afternoon, and the latest inflation data is adding further pressure. Spot gold last traded at $5,035.80 an ounce, down more than 6% on the day. Prices are now down 10% from Thursday’s intraday all-time high of $5,600 an ounce.

Although the gold market hasn’t paid much attention to U.S. interest rates, analysts note that higher inflation pressures could bring the traditional relationship back into focus. Rising producer prices could force the Federal Reserve to maintain its neutral monetary policy longer than expected.

Wednesday, the Federal Reserve kept interest rates unchanged in a range between 3.50% and 3.75% and is expected to maintain a neutral stance until at least June. Federal Reserve Chair Jerome Powell added that upside risks to inflation and downside risks to employment have both diminished slightly.

He said that the central bank’s monetary policy is well-positioned to take some time to see how economic activity unfolds through 2026.

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