Gold prices slipped toward $4,700 an ounce Wednesday as surging US inflation crushed Federal Reserve (Fed) rate cut expectations while India simultaneously raised import duties on the metal.
Spot gold fell 0.4 percent to $4,695.99 per ounce in early Asian trading, extending losses after US consumer inflation accelerated to 3.8 percent in April, its highest reading since May 2023. A separate report released Wednesday showed the Producer Price Index (PPI) jumped 6 percent year on year in April, the biggest gain since 2022, driven by higher energy and freight costs linked to the ongoing Middle East conflict.
Higher inflation strengthens the case for the Fed to keep borrowing costs elevated. That weighs directly on gold, which pays no interest and becomes less competitive against yield-bearing assets when rates stay high. The Chicago Mercantile Exchange (CME) Group’s FedWatch tool showed investors pricing out any rate cut this year, with some now factoring in the possibility of a hike before year end.
“Inflation data out of the U.S. has really watered down hopes…that there will be rate cuts from the Fed,” said Kyle Rodda, senior financial market analyst at Capital.com.
India compounded the pressure from an entirely different direction. New Delhi raised import tariffs on gold and silver from 6 to 15 percent Wednesday, aiming to curb bullion inflows and ease strain on the country’s foreign exchange reserves. India ranks among the world’s largest consumers of physical gold, and the sudden tariff increase threatens to suppress demand at one of the market’s most critical support pillars.
The two forces together represent a rare dual squeeze: monetary policy pulling in one direction, physical demand contracting in another.
Despite Wednesday’s losses, gold remains up nearly 47.5 percent year on year, underpinned by sustained central bank buying and geopolitical instability. The World Gold Council (WGC) reported global gold demand hit a record high in the first quarter of 2026, with bar and coin demand surging 42 percent year on year as investors sought protection amid the Middle East crisis.
Spot gold’s next key support sits near $4,645. Analysts are watching Fed communications closely, alongside the ongoing US and China summit, for signals that could shift the metal’s near-term direction.
