Gold prices fell from record highs in Asian trade on Wednesday, pressured by some strength in Treasury yields after Federal Reserve Chair Jerome Powell flagged little hurry to cut interest rates.
Traders also remained biased towards the dollar ahead of key U.S. consumer price index inflation data, which is expected to factor into the outlook for rates.
Still, gold hit a series of record highs this week, as risk aversion surged in the face of increased U.S. trade tariffs under President Donald Trump. Trump imposed 25% import duties on steel and aluminum, and also flagged plans for reciprocal tariffs against America’s biggest trading partners.
The move ramped up demand for safe haven assets, as did Trump’s rhetoric on the Israel-Hamas conflict and the Gaza strip, which attracted ire from Middle Eastern powers. Spot gold hit a record high of $2,943.25 an ounce on Tuesday.
Spot gold fell 0.4% to $2,887.02 an ounce, while gold futures expiring in April sank 0.7% to $2,912.74 an ounce by 01:08 ET (06:08 GMT).
Gold pressured by yield spike following Powell comments
Gold was pressured chiefly by a bump-up in Treasury yields- where the 10-year rate rose back above the 4.5% mark- after Powell said the Fed remained cautious over cutting interest rates further.
Powell- in a testimony before the Senate’s banking committee, cited sticky inflation, resilience in the U.S. economy, and uncertainty over the inflationary effects of Trump’s policies as giving the Fed little impetus to cut rates further.
His comments largely echoed a similar rhetoric put forward by the Fed Chair during the central bank’s January meeting- where the Fed left rates unchanged.
Powell also noted that U.S. monetary policy had been sufficiently loosened after 100 basis points of rate cuts through 2024.
Treasury yields surged after Powell’s comments, pressuring gold and other metal prices. The prospect of high interest rates presents more pressure for non-yielding assets such as gold, given that it increases the opportunity cost of investing in the assets.
Still, despite recent losses, gold was sitting on a strong run-up over the past week.
Other precious metals fell on Wednesday after clocking some gains over the past week, although they mostly lagged gold. Platinum futures were flat at $1,037.45 an ounce, while {{|silver futures}} fell 0.2% to $32.252 an ounce.
Among industrial metals, benchmark copper futures on the London Metal Exchange rose 0.1% to $9,370.10 a ton, while March copper futures fell 0.1% to $4.5918 a pound.
Powell is now set to testify before Congress later on Wednesday.
CPI data awaited for more rate cues
But before Powell’s testimony, focus is squarely on CPI inflation data for January, due on Wednesday.
The CPI print is expected to remain largely steady from December, as inflation turned sticky in recent months.
Goldman Sachs said it expects core CPI- which excludes volatile items- to read slightly above consensus in January.
