Gold prices paused after a spectacular rally that sent the precious metal to a new all-time high, as investors chose to lock in profits ahead of upcoming U.S. inflation data — a key indicator that could shape the Federal Reserve’s next policy direction.
Spot gold fell about 4.7% to US$4,174 per ounce on Tuesday, retreating from Monday’s record peak of US$4,381.21. The exceptional rally — up more than 63% so far this year — is now facing a healthy correction amid a stronger U.S. dollar and widespread profit-taking.
“The market needs to take a breather after such a rapid rise,” said a commodities market analyst in Mumbai, adding that short-term profit-taking often occurs when gold reaches new records. “However, the medium-term trend remains positive as long as expectations for Fed easing stay strong.”
Focus Shifts to Inflation Data
Investors are now awaiting the release of the U.S. Consumer Price Index (CPI) report due this Friday. The data is expected to be a key signal for the Fed’s next rate decision. Markets are projecting annual inflation to remain steady at around 3.1% for September, which could strengthen the case for a 25-basis-point rate cut.
As a non-yielding asset, gold typically benefits from a low interest rate environment, since it reduces the opportunity cost of holding the metal.
Pressure from a Stronger Dollar
The U.S. Dollar Index (DXY) rose about 0.3%, making gold more expensive for overseas buyers. The stronger greenback added further pressure for investors to secure profits after the prolonged rally.
Other precious metals also declined — silver fell 6.2% to US$49.00 per ounce, reflecting reduced short-term interest in the precious metals sector.
Rally Not Over Yet
Despite this pullback, the medium-term sentiment for gold remains firmly positive. Ongoing central bank purchases, global geopolitical uncertainty, and expectations of continued Fed easing remain key drivers supporting the metal’s strength.
“As long as inflation stays under control and monetary policy continues to ease, gold still has room to hold at elevated levels,” the analyst added.