Gold prices slipped for a second consecutive session after stronger-than-expected inflation data from the United States increased expectations that interest rates could remain elevated for longer.
As of this morning, spot gold fell around 0.4 per cent to approximately US$4,695.18 per ounce, equivalent to roughly S$6,330 per ounce based on current exchange rates. The decline followed another 0.4 per cent drop recorded a day earlier.
Market sentiment weakened after fresh U.S. inflation figures showed consumer prices rising at their fastest pace since 2023. At the same time, inflation-adjusted wages reportedly fell for the first time in three years, adding to concerns about persistent cost pressures across the American economy.
The latest data has led investors to reassess expectations surrounding the Federal Reserve System, with financial markets now pricing in a more than 40 per cent probability of another interest rate hike before the end of the year.
Higher Interest Rate Expectations Pressure Gold Market
Gold prices are often sensitive to interest rate expectations because higher rates typically strengthen the U.S. dollar and increase the appeal of interest-bearing investments such as bonds and fixed deposits.
Despite this, analysts noted that gold has remained relatively resilient compared to previous tightening cycles.
According to strategists from JPMorgan Chase, the precious metal continues to receive strong underlying support from demand, particularly from central banks increasing their gold reserves.
The bank’s Asia rates and foreign exchange division reportedly pointed out that the relationship between rising rates and weaker gold prices has not been as straightforward in recent years.
Analysts observed that since 2022, gold prices have often stayed firm even during periods of aggressive monetary tightening. Meanwhile, when interest rates begin falling, gold prices typically strengthen further as investors seek safe-haven assets and inflation protection.
Central Bank Demand Continues Supporting Gold
One of the key reasons behind gold’s resilience has been sustained buying activity from global central banks.
Many countries have been increasing their gold holdings to diversify reserves away from the U.S. dollar and reduce exposure to geopolitical risks and currency volatility.
Financial strategists believe this trend has helped create a strong floor for gold prices, preventing sharper declines even when borrowing costs rise.
The precious metal also continues attracting investors looking for portfolio diversification, particularly during periods of economic uncertainty, stock market volatility and inflation concerns.
Meanwhile, oil prices also remained in focus across Asian trading sessions after Brent crude surged more than 3 per cent overnight before easing slightly during regional trading hours.
Currency markets saw some movement as well, with the Malaysian ringgit strengthening against the U.S. dollar amid optimism surrounding first-quarter economic growth expectations.
Investors are now closely watching upcoming comments from Federal Reserve officials and future inflation data for clearer signals on the direction of U.S. monetary policy and global commodity markets.