13.05.202614:44:55UTC+00Gold Drops as Inflation Fears Reduce Rate Cut Bets

Gold prices fell for a second consecutive session on Wednesday, dropping to $4,680 an ounce, as rising inflation further weakened expectations for interest rate cuts. At the same time, markets are closely watching the upcoming meeting between Donald Trump and Xi Jinping.

US producer prices rose more than expected in April, posting their largest increase since early 2022, driven by higher trade and energy costs amid the ongoing Iran war. This followed Tuesday’s data showing consumer inflation accelerated to 3.8% last month, the highest reading since May 2023. In response, investors have largely priced out the possibility of a US rate cut this year, according to CME Group’s FedWatch tool.

Although gold is traditionally viewed as a hedge against inflation, higher interest rates generally pressure the non-yielding metal by increasing the opportunity cost of holding it. Demand was further hit after India raised import duties on gold and silver to 15% from 6%.

Meanwhile, US President Donald Trump’s visit to China will be closely watched for any signs of progress on the fragile trade truce and developments related to the Iran conflict.