Gold Pares Some Gains After Strong GDP

Gold weakened below $4,650 an ounce on Friday and was on track to fall nearly 2% for the week, pressured by accelerating US inflation that fueled concerns the Federal Reserve may need to keep interest rates elevated or even hike them. Data released earlier this week showed US wholesale inflation surged at its fastest pace since 2022 in April, while consumer prices posted their largest increase since 2023. Inflationary pressures have been driven largely by the prolonged Middle East conflict and the near-shutdown of the critical Strait of Hormuz, which has severely disrupted global energy shipments. Markets have now fully ruled out a Fed rate cut this year, with some traders increasingly pricing in the possibility of a rate hike by December. Meanwhile, President Trump met with Chinese President Xi Jinping, discussing efforts to keep Hormuz open to preserve energy trade. Separately, India tightened gold import regulations further as authorities intensified measures to support the rupee.

Gold hovered around $4,700 an ounce on Thursday, halting a two-day decline, as investors focused on the meeting between US President Donald Trump and Chinese President Xi Jinping. Trump stated that Xi had agreed to assist with Iran "with whatever" he needs, while Xi noted progress in trade talks but warned that disputes over Taiwan could strain relations and even risk conflict. Investors also digested US data showing both import and export prices surged more than expected last month, the largest increase since March 2022, driven by rising fuel import costs and nonagricultural export prices. Retail sales rose 0.5%, in line with forecasts. Following earlier hot consumer and producer price data, markets have priced out US interest rate cuts for this year, with a near 30% chance of a hike by December.

Gold held below $4,700 an ounce on Thursday after sliding for two straight sessions, as rising US inflation reinforced expectations that the Federal Reserve could keep interest rates higher for longer or even hike them. Data released Wednesday showed US wholesale inflation accelerated in April to its fastest pace since 2022, fueled by higher trade and energy costs linked to the Iran war. The report followed Tuesday’s data showing consumer inflation climbed to 3.8% last month, the highest reading since May 2023. Investors have now fully ruled out a Fed rate cut this year, while increasingly expect a greater likelihood of another rate hike before year-end. Although gold is traditionally viewed as a hedge against inflation, higher interest rates tend to pressure the non-yielding asset. Meanwhile, markets are also closely watching President Trump’s visit to China for signs of progress on the fragile trade truce and developments surrounding the Iran conflict.