Gold Jumps as US Inflation Cools, Dollar Weakens, and Treasury Yields Fall

Gold prices climbed on Wednesday, driven by the release of December’s US Consumer Price Index (CPI). The data revealed milder inflation in the United States, as reported by Investing.com.

This development fueled expectations of monetary easing by the Federal Reserve in 2025, benefiting gold in two ways. The most liquid gold contract for February delivery rose 1.32% to $2,717.80 per troy ounce on the Comex division of the New York Mercantile Exchange.

The softer core CPI print helped alleviate concerns about residual inflation seasonality. This may have kept Treasury buyers on the sidelines, according to TD Securities. A shift in US yields could further boost gold’s strength.

In addition, macro funds have already liquidated over 50% of their extreme position held on US election night. In Asia, selling activity among major traders in Shanghai proved short-lived.

This followed recent capital control adjustments by the People’s Bank of China and stern warnings against “market-disrupting behavior”. The bank’s monitoring now indicates renewed buying activity in gold.

Gold Jumps as US Inflation Cools, Dollar Weakens, and Treasury Yields Fall. (Photo Internet reproduction)

Geopolitical tensions, which have driven gold prices in recent quarters, saw a potential easing. Axios reported that Israel and Hamas reached a ceasefire and hostage deal on Wednesday, citing a US official.

The precious metal’s appeal increased as the dollar weakened, making it more attractive to foreign buyers. Additionally, falling Treasury yields made gold more competitive as a safe-haven investment.

In short, these factors combined to push gold prices higher, reflecting the complex interplay of economic indicators and global events in the precious metals market.