• Gold price faces pressure while investors see the Fed keeping interest rates at current levels until the third quarter of this year.
• US core inflation has come in higher than expected for three months in a row.
• Increasing geopolitical tensions and physical Gold buying by global central banks are expected to limit Gold’s downside.

Gold price (XAU/USD) edges down to $2,330 in Thursday’s European session as traders have priced out strong speculation that the Federal Reserve (Fed) will pivot to rate cuts in the June meeting. Investors pare Fed rate cut bets drastically after the United States Consumer Price Index (CPI) report for March showed that core price pressures rose more than expected for straight three months.

Hot inflation figures have heightened fears that US interest rates will remain higher in the range of 5.25%-5.50% for a longer period. This is a favorable scenario for interest-bearing assets, such as US bonds and the US Dollar. 10-year US Treasury yields fell slightly to 4.56% in Thursday’s London session but remain close to more than a four-month high. The US Dollar Index (DXY) trades close to an almost five-month high near 105.30.

Generally, higher bond yields increase the opportunity cost of holding investments in non-yielding assets such as Gold. Gold price has retreated from fresh all-time highs at $2,365. However, the near-term demand for Gold is still intact due to heightened geopolitical risks. Fears of direct involvement of Iran in the Israel-Hamas war in Gaza have increased as the Israeli army is planning to invade Rafah, where most of the displaced Palestinians are refuged. 

Apart from that, pent-up demand for Gold from global central banks is expected to keep its price supported. The World Gold Council (WGC) showed early this week that China extended its Gold buying spree in February for the 17th consecutive month.