Spot gold falls as U.S. inflation data fuels Fed rate cut hopes

January 17, 2025 (MLN): Gold prices decreased on Friday as U.S. inflation data and dovish comments from a Federal Reserve official revived hopes the central bank might cut interest rates more than once this year.

Spot gold prices decreased by 0.19% ($5.26) at $2,709.61 as of [5pm PST] from the prior day's close of $2,714.87 per ounce.

U.S. gold futures dropped 0.7% to $2,732.00.

"Gold gained support this week, buoyed by weaker-than-expected U.S. economic data, including PPI and CPI figures, alongside dovish remarks from Federal Reserve policymakers," said Zain Vawda, market analyst at MarketPulse by OANDA.

"Persistent uncertainties surrounding 2025 further bolstered the metal's appeal", he added.

U.S. data released on Wednesday showed softer-than-expected core inflation, raising bets on a Fed rate cut, with rate futures traders pricing in nearly even odds of two cuts by year-end, as per Reuters.

Echoing this sentiment, Fed Governor Christopher Waller said three or four cuts could be possible if U.S. economic data weakens further.

Gold is considered an inflation hedge, while lower rates boost the non-yielding asset's allure.

As President-elect Donald Trump's Jan. 20 inauguration approaches, attention is also centered on his policies, which could stimulate inflation. He has pledged to impose trade tariffs.

"While upside risk to inflation increases the prospects of shallower rate cuts, this also means lower or steady real rates which will be supportive for gold investment," ANZ said in a note.

"We expect exchange-traded funds flows to turn positive after three years of consecutive outflows", ANZ added.

Elsewhere, gold discounts in India increased to their widest in six months as a rise in domestic prices dampened demand and jewelers awaited the annual federal budget, Reuters further noted.

Spot silver was down 0.9% to $30.49 per ounce. Palladium eased 0.5% to $936.31.

Platinum added 0.6% to $937.50 but set to register its worst week since November.

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