Gold futures edged higher Tuesday as the U.S. dollar softened following the release of April’s inflation data, which showed consumer prices rising at their slowest pace in four years. The most active June 2025 gold futures contract climbed 3,256.90 per ounce.
While the modest rebound provided some relief for investors, it only recouped a fraction of Monday’s steep 2.62% decline. Gold has faced sustained pressure since last Wednesday, May 7, when June futures began a four-day correction that slashed prices from 3,241.80. Analysts attributed Tuesday’s gains solely to dollar weakness, with the dollar index dropping 0.79% to 100.945—boosting gold’s appeal as a dollar-denominated asset.
Inflation Cools but Remains Above Fed’s Target
The U.S. Bureau of Labor Statistics reported that annual inflation eased to 3.2% in April, slightly above economists’ expectations of 3.1% but down from March’s 3.3% reading. Core CPI, which excludes volatile food and energy prices, held steady at 2.8% year-over-year, matching forecasts.
“The data confirms we’re on a disinflationary path, though progress remains slower than the Federal Reserve would like,” said Marcus Waterman, Chief Market Strategist at Capital Heights Investments. “This environment supports gold’s role as a portfolio hedge despite recent price swings.”
Dollar Retreats After Trade Truce Rally
The dollar had surged to a one-month high Monday after the U.S. and China agreed to reduce reciprocal tariffs, easing trade tensions between the world’s two largest economies. However, Tuesday’s inflation report reversed those gains, sending the dollar index down 0.81% to 100.93.
Market experts caution that the 90-day trade truce may not resolve underlying tensions. Quasar Elizundia, senior analyst at Pepperstone, noted, “While the tariff reductions improved market sentiment, doubts about the agreement’s durability could sustain demand for gold as a safe haven.”
Fed Rate Cut Expectations Diminish
Shifting expectations for Federal Reserve policy have added volatility to gold markets. The CME FedWatch Tool now prices just an 8.2% chance of a June rate cut, down sharply from 30.5% last week. Investors will scrutinize upcoming Fed communications for clues on the timing of potential easing, which remains a key driver for gold prices.
Conclusion
Gold’s rebound reflects its sensitivity to dollar movements and inflation trends, though lingering trade uncertainties and delayed Fed rate cuts may sustain volatility. As markets weigh disinflation progress against geopolitical risks, bullion’s role as a hedge is likely to keep prices supported in the near term.
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