Gold Pulls Back from Record High
Gold dropped to $2,875 per ounce on Wednesday, extending the pullback from the record-high of $2,942 in the previous session as evidence of high inflation in the US backed hawkish bets for the Fed and pressured non-interest-bearing assets.
Headline inflation unexpectedly rose to 3% in January, and the core gauge was sharply above expectations at 3.3%. The results raised concerns that stubborn inflation in the US will prevent the Federal Reserve from having room to cut interest rates this year, driving investors to favor fixed-income assets with coupons instead of bullion.
Still, dovish central banks elsewhere and an upturn in safety demand kept gold prices over 10% higher since the start of the year. Major central banks that have cut rates and delivered dovish outlooks include the ECB, BoE, RBI, and the BoC, with the latter ending quantitative tightening. In the meantime, demand for safety was underpinned by concerns of a trade war amid tensions imposed by US President Trump.
Source: Trading Economics
