Gold Hits Six-Month Low as US Inflation Rises Again in May

Gold prices slid to their lowest level in more than six months on Tuesday, extending a recent decline as a hotter-than-expected US inflation reading for May dampened expectations for Federal Reserve interest rate cuts.

The metal fell as the US consumer price index (CPI) rose 0.4% month-over-month in May, above the 0.3% consensus estimate, pushing the annual rate to 3.8% from 3.6% in April. The data reinforced the view that the Fed will need to keep rates higher for longer to curb persistent price pressures, a scenario that typically weighs on gold by raising the opportunity cost of holding non-yielding assets. Live gold prices and charts on NowPrice show the spot price trading near $2,280 per ounce, down roughly 8% from its April peak. This decline reflects the well-established inverse correlation between gold and the US Dollar Index (DXY), which strengthened on the CPI release, as well as the sensitivity of gold to real US 10-year yields; the 10-year real yield climbed to 2.1%, increasing the appeal of bonds relative to bullion. The move also comes despite continued central-bank gold buying since 2022, which had previously supported prices, but near-term speculative flows have turned negative, as evidenced by outflows from gold ETFs like GLD and IAU.

The inflation surprise also boosted the US dollar and pushed Treasury yields higher, further pressuring gold. The 10-year real yield climbed to 2.1%, increasing the appeal of bonds relative to bullion. The divergence between COMEX futures and LBMA spot prices has widened, indicating some dislocation in physical delivery markets, though overall jewelry and investment demand remain subdued in the face of higher rates. Looking ahead, traders will focus on the Fed's policy decision next week, where updated economic projections and Chair Powell's tone could provide clearer signals on the rate path. If the central bank signals a prolonged pause, gold may face additional downside toward the $2,200 support level, especially if the DXY continues to rally and real yields stay elevated. However, any surprise dovishness could trigger a short-covering rally, given the metal's oversold condition.