Gold (CM:XAUUSD) fell by around 1% to $2,330 today after the consumer price index (CPI) climbed by 3.5% year-over-year in March. Sequentially, the figure accelerated from the 3.2% mark for February.
Fading Rate Cut Bets
The hot inflation print means the Fed’s stance could turn hawkish, possibly lowering the possibility of rate cuts in the near term. Still, gold prices could continue to display strength amid elevated geopolitical tensions in the Middle East and Ukraine. Earlier, policymakers largely hinted at three rate cuts this year. However, the latest inflation print could bring back the higher-for-longer mantra, while adding another dose of uncertainty to the timing of rate cuts.
Higher Rates May Not Dent Demand for Gold
While higher rates have traditionally made non-interest-bearing assets such as gold less attractive for investors, the past few months have been a lesson in the opposite direction. Despite expectations that rising interest rates would dampen demand for gold, recent market dynamics have defied this trend.
Furthermore, the short-term demand for gold may remain strong due to its appeal as a safe-haven asset and purchases by central banks. Notably, China’s central bank has added to its bullion reserves for 17 consecutive months now.
Is Gold Predicted to Go Up?
Additionally, investors sitting on the sidelines could choose to buy today’s dip, following gold’s record run over the past few months. Meanwhile, the TipRanks Technical Analysis tool is flashing Strong Buy signals for gold. This implies the Bull thesis for the yellow metal still remains intact.
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