Gold rebounds after CPI pressure

"Higher-than-expected U.S. CPI data put pressure on gold yesterday, pushing the metal down toward nearly USD 4,640/oz. However, the subsequent rebound back above USD 4,700/oz suggests that the market is beginning to reassess gold's role as a safe-haven asset and a store of value amid persistent inflation and rising macroeconomic uncertainty."

"April U.S. CPI data showed that price pressures remain a concern. CPI rose 0.6% month-on-month and 3.8% year-on-year, marking the highest annual inflation rate since May 2023. Core CPI also increased by 0.4%, while U.S. Treasury yields and the U.S. dollar both recovered after the data release. Higher-than-expected inflation reduced expectations that the Fed could cut interest rates soon, thereby increasing the opportunity cost of holding gold."

"Normally, higher CPI means rising yields, a stronger U.S. dollar, and pressure on gold. This time, however, inflation is not mainly driven by strong demand, but by energy shocks and geopolitical tensions, which are pushing costs higher, weighing on growth, and limiting the Fed's flexibility. Therefore, after a period of pressure from monetary policy expectations directly linked to inflation, gold is now beginning to regain its defensive role within portfolios."

"In addition, gold's broader trend remains supported by investment demand and central bank demand. According to the World Gold Council, total global gold demand in Q1 2026, including OTC, rose 2% year-on-year to 1,231 tonnes, while the value of demand reached a record level of around USD 193 billion. Notably, gold ETFs recorded net purchases of 62 tonnes in the first quarter, showing that investment flows remain present even as gold prices trade at elevated levels."

Higher-than-expected U.S. CPI pressured gold, pushing it toward nearly $4,640/oz. Gold then rebounded back above $4,700/oz, indicating a reassessment of gold’s safe-haven and store-of-value role. April CPI rose 0.6% month-on-month and 3.8% year-on-year, the highest annual rate since May 2023, while core CPI increased 0.4%. Treasury yields and the U.S. dollar recovered after the data, reducing expectations for near-term Fed rate cuts and raising the opportunity cost of holding gold. Gold did not sustain its decline, suggesting inflation is being driven more by energy shocks and geopolitical tensions than by strong demand, which limits Fed flexibility and supports gold’s defensive appeal. Investment demand and central bank buying also remain supportive, with Q1 2026 global gold demand up 2% to 1,231 tonnes and gold ETFs recording net purchases of 62 tonnes.

Read at London Business News | Londonlovesbusiness.com