Higher-than-expected U.S. CPI data put pressure on gold yesterday, pushing the metal down toward nearly USD 4,640/oz.
However, the subsequent rebound back above USD 4,700/oz suggests that the market is beginning to reassess gold’s role as a safe-haven asset and a store of value amid persistent inflation and rising macroeconomic uncertainty.
April U.S. CPI data showed that price pressures remain a concern. CPI rose 0.6% month-on-month and 3.8% year-on-year, marking the highest annual inflation rate since May 2023.
Core CPI also increased by 0.4%, while U.S. Treasury yields and the U.S. dollar both recovered after the data release. Higher-than-expected inflation reduced expectations that the Fed could cut interest rates soon, thereby increasing the opportunity cost of holding gold.
The notable point is that gold did not sustain its decline after the CPI data. Instead, it quickly recovered from a low of around USD 4,640/oz back above USD 4,700/oz, indicating a shift in how the market is responding to inflation data.
Normally, higher CPI means rising yields, a stronger U.S. dollar, and pressure on gold. This time, however, inflation is not mainly driven by strong demand, but by energy shocks and geopolitical tensions, which are pushing costs higher, weighing on growth, and limiting the Fed’s flexibility. Therefore, after a period of pressure from monetary policy expectations directly linked to inflation, gold is now beginning to regain its defensive role within portfolios.
In addition, gold’s broader trend remains supported by investment demand and central bank demand. According to the World Gold Council, total global gold demand in Q1 2026, including OTC, rose 2% year-on-year to 1,231 tonnes, while the value of demand reached a record level of around USD 193 billion. Notably, gold ETFs recorded net purchases of 62 tonnes in the first quarter, showing that investment flows remain present even as gold prices trade at elevated levels.
Central bank demand also continues to be an important pillar of support. The World Gold Council reported that central banks bought a net 244 tonnes of gold in Q1 2026, up 3% year-on-year and above the five-year average. This reflects the continued trend of reserve diversification amid rising geoeconomic risks.
Overall, gold is no longer reacting one-dimensionally to CPI data. High inflation initially weighed on the precious metal due to rising yields and a stronger U.S. dollar, but the subsequent rebound shows that gold’s safe-haven role is starting to stand out again. In an environment where inflation is accompanied by geopolitical tensions, high energy prices, and growth risks, gold still has a strong foundation to maintain its appeal as a defensive asset. Therefore, gold’s short-term trend may continue to fluctuate, but its medium-term foundation remains supported by demand for value preservation, ETF inflows, and central bank buying.
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