FX.co ★ Gold Weighed Down by Fed Rate Hike Fears

Gold fell below $4,700 an ounce on Thursday, extending a two-day decline, after hotter US inflation data strengthened expectations that the Federal Reserve will keep interest rates elevated for longer—or even raise them further.

Data released Thursday showed US wholesale inflation in April accelerating to its fastest pace since 2022, driven by higher trade and energy costs linked to the Iran war. That followed Tuesday’s report indicating consumer inflation rose to 3.8% last month, the highest level since May 2023.

In response, investors have now effectively priced out any possibility of a Fed rate cut this year and are increasingly anticipating a higher risk of an additional rate hike before year-end. While gold is traditionally considered an inflation hedge, higher interest rates typically weigh on the non-interest-bearing metal by increasing the appeal of yield-generating assets.

At the same time, markets are closely tracking President Trump’s visit to China for signals on the fragile trade truce, as well as ongoing developments related to the Iran conflict.