Gold steady as inflation data sparks caution over Fed outlook

Gold prices held steady on Thursday as investors assessed a wave of economic data indicating persistent US inflation, hinting that the Federal Reserve may proceed cautiously with further interest rate cuts.

Spot gold held its ground at $2,637.78 per ounce, as of 0739 GMT. US gold futures edged 0.1 per cent lower to $2,637.30.

The market is focusing on the Fed's rate cuts, with the latest core Personal Consumption Expenditures (PCE) data suggesting slowing inflation, leading to expectations that the Fed's policy next year might be less dovish than previously projected, said Kelvin Wong, OANDA's senior market analyst for Asia Pacific.

The Fed's struggle to bring inflation back to its 2 per cent target, combined with the possibility of higher tariffs under the upcoming Trump administration may constrain the central bank's ability to implement rate cuts next year.

Markets now see a 68.2 per cent chance of a quarter-point rate cut in December, as per the CME group's FedWatch tool.

Elsewhere, Mexican President Claudia Sheinbaum warned of retaliation if Trump enforces a 25 per cent tariff, citing potential US job losses and higher consumer prices.

Gold is regarded as a safe-haven investment during periods of economic or geopolitical instability, including trade wars.

Trading is expected to be thin with US markets closed on Thursday for the Thanksgiving holiday.
In the short term, particularly over the next few days to two weeks, gold could come under further pressure, Wong said, adding the longer-term bullish trend for gold, however, remains intact.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.10 per cent to 878.55 metric tonnes on Wednesday.

Spot silver fell 0.8 per cent to $29.84 per ounce, platinum edged 0.1 per cent higher to $928.10 and palladium added 0.6 per cent to $978.05.