Gold price climbs to record high on Fed interest rate cut bets

Gold prices climbed to a record on Wednesday after weaker-than-expected US inflation data reinforced expectations of interest rate cuts, while investors continued to seek protection from geopolitical uncertainty.

Gold futures (GC=F) rose 1% to $4,643.80 an ounce, while spot prices gained 0.9% to $4,634.45 at the time of writing, having touched an all-time high of $4,639.42 earlier in the session.

Tim Waterer, chief market analyst at KCM Trade, said the latest inflation figures had encouraged hopes of looser monetary policy. “US consumer price index figures showed that inflation remained relatively contained at 2.6% (year-on-year), and risk assets may be hoping for a similarly benign producer price index reading to keep expectations alive for further monetary policy easing,” he explained.

Read more: Stocks rise as China trade surplus hits record high

Core consumer prices in the US rose 0.2% in December compared with the previous month, below forecasts for a 0.3% increase and an annual rate of 2.7%. Core producer price data for December is due later on Wednesday.

Markets are pricing in two interest rate cuts of 25 basis points this year, with the first expected as early as June.

Gold (GC=F), which does not offer a yield, typically benefits from a low interest rate environment as well as periods of geopolitical or economic uncertainty.

ANZ said in a note on Wednesday that it expects gold (GC=F) to trade above $5,000 an ounce in the first half of 2026.

Oil prices pulled back on Wednesday after four consecutive sessions of gains, as Venezuela resumed exports and US crude and fuel inventories rose, offsetting concerns about potential supply disruptions from Iran amid deadly civil unrest.

Brent crude (BZ=F) futures fell 0.7% to $65.03 a barrel, while West Texas Intermediate (CL=F) slipped 0.8% to $60.70 at the time of writing.

Suvro Sarkar, an energy analyst at DBS Bank, said markets had already priced in much of the geopolitical risk linked to tensions in Iran. “Oil prices have already priced in quite a bit of geopolitical risk premium over the last few days in the face of rising turmoil in Iran, compounded by drone attacks in the black sea,” he said.

Read more: As the gold rally rubs off on silver, here’s what you need to know

“Unless we see further escalation and chances of actual disruption in oil flows, the market could consolidate at these levels and wait for the next moves in a complex world order,” Sarkar added. He said that large increases in US crude and product inventories, reported by the American Petroleum Institute late on Tuesday, were also weighing on prices.

US crude inventories rose by 5.23 million barrels in the week ended January 9, according to the API, citing market sources.

Additional pressure on prices has come from Venezuela, where the Organisation of the Petroleum Exporting Countries (OPEC) member has begun reversing oil (BZ=F, CL=F) production cuts made under a US embargo as crude exports resumed, three people familiar with the matter told Reuters.

Sterling edged higher against its major peers in early European trading on Wednesday, as investors looked ahead to the first domestic economic data release of the year, with UK growth figures for November due on Thursday.

The pound rose 0.2% against the dollar to $1.3451 and gained a similar amount against the euro to €1.1542.

The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six major currencies, was flat at 99.12.

Economists expect the Office for National Statistics to report flat economic growth in November, with consensus forecasts pointing to a 0.0% reading. Traders are positioning around the release, with the pound likely to move depending on whether the data exceeds or falls short of expectations.

Stocks: Create your watchlist and portfolio

Some economists, however, believe the consensus is overly downbeat. Robert Wood, chief UK economist at Pantheon Macroeconomics, said growth was likely to outperform forecasts. “We expect November’s GDP report, due on January 15, to show growth of 0.2% month-to-month, up from a fall of 0.1% in October,” he said.

In equities, the FTSE 100 (^FTSE) on Wednesday was up 0.2%, trading at 10,161 points. For more details on market movements, check our live coverage here.

Read more:

Download the Yahoo Finance app, available for Apple and Android.