Gold steadies after weekly drop as US inflation fears mount

Gold prices held steady on Monday after suffering their biggest weekly decline in months, as concerns grew that President Donald Trump’s tariff-driven inflation pressures in the US could delay the Federal Reserve’s rate-cutting cycle. According to Bloomberg, bullion traded around $3,340 an ounce in early Asian hours, down 0.1 per cent at 8:35 a.m. Singapore time. This follows a 1.8 per cent drop last week, the sharpest fall in three months, as signs of accelerating US wholesale inflation tempered expectations of near-term monetary easing.

Tariff strains fuelling inflation

Data released last week showed US wholesale inflation in July jumped at its fastest pace in three years, prompting traders to trim bets on a September Fed rate cut. Gold, which offers no yield, tends to lose appeal in a higher interest rate environment.

Raphael Bostic, President of the Atlanta Federal Reserve, told Bloomberg after touring the southeastern US that “tariff strains are real” and that high borrowing costs are eroding corporate profits. Markets, however, still expect as many as two Fed cuts before year-end, though the timing remains uncertain.

Geopolitical lens: Trump-Zelenskiy talks in focus

Traders are also keeping a close watch on President Trump’s upcoming meeting with Ukrainian leader Volodymyr Zelenskiy. The talks are expected to define terms for a possible peace deal discussed during Trump’s meeting with Russian President Vladimir Putin in Alaska last week.

As per Bloomberg, the outcome of these negotiations could sway gold sentiment, with a ceasefire potentially reducing haven demand, while prolonged conflict could spur more inflows into bullion.

Gold consolidates near record highs

Despite the recent pullback, gold has been consolidating just below its record high of $3,500 an ounce, reached in April. The metal remains up more than 25 per cent so far this year, buoyed by geopolitical risks, concerns over global growth, and central banks diversifying away from dollar-denominated assets.

Silver and platinum were little changed on Monday, while palladium posted modest gains, Bloomberg reported. Meanwhile, the Bloomberg Dollar Spot Index was steady, offering little directional push for precious metals.

With inflation fears intensifying and geopolitics still unsettled, gold’s trajectory may hinge on whether the Fed can balance market expectations with economic realities.

(With inputs from the agencies)