Gold Retreats from Record High as Fed Signals Patience on Interest Rates

Gold prices declined for a second consecutive day, retreating from the recent record high, following indications from the Federal Reserve that interest rate cuts may not be imminent.

The yellow metal fell below $2,890 per ounce, having reached a peak of $2,942 on Tuesday before ending the day lower. Federal Reserve Chair Jerome Powell suggested that the Fed would exercise patience before further easing monetary policy. This news led to an increase in yields on 10-year US Treasuries, which can act as headwinds for gold since it does not offer interest payments.

Gold has rallied significantly this year, setting multiple record highs and potentially approaching a test of $3,000 per ounce. The surge has been driven by increased demand for safe-haven assets amid heightened trade tensions, including the planned tariffs on steel and aluminum imports by the Trump administration. Traders are closely monitoring the potential implications for the US economy and monetary policy if the White House's stance on trade and immigration fuels inflation and impinges on growth.

Powell stated during his testimony on Tuesday that it would be unwise to speculate on the impact of tariffs.

Gold's recent ascent has been accompanied by inflows into bullion-backed exchange-traded funds. Global holdings have increased in six of the past seven weeks, reaching their highest level since November, according to Bloomberg calculations. Banks have projected that a challenge of $3,000 per ounce is likely. Citigroup, for instance, predicted last week that gold could reach this level within three months due to geopolitical tensions and trade wars bolstering demand.

Investors will also be watching closely for key US inflation data later on Wednesday. The Bureau of Labor Statistics is expected to report that the consumer price index excluding food and energy rose 0.3% in January, marking the fifth increase in the last six months. This would support the Fed's current stance of holding rates steady.

At 4:17 p.m. in Singapore, spot gold was trading 0.3% lower at $2,889.81 per ounce. The Bloomberg Dollar Spot Index gained 0.1%. Silver and platinum remained largely unchanged, while palladium declined.