On Thursday (January 16th), spot gold fluctuated narrowly in the Asian market, currently trading around $2596 per ounce. Gold prices continued to rise on Wednesday, closing at $2696.61 per ounce. Core inflation data in the United States was lower than expected, easing inflationary pressures and reigniting hopes that the Federal Reserve's easing cycle may not be over. US bond yields fell sharply from a nearly 14 month high, and the US dollar fell, providing upward momentum for gold prices.

Although the ceasefire agreement reached in Gaza once caused gold prices to give up their gains, buying on dips helped gold prices close up 0.72%, approaching the 2700 mark.

In December, consumer prices in the United States experienced the largest increase in nine months due to rising energy commodity costs, indicating that inflation remains high and in line with the Federal Reserve's forecast to reduce interest rate cuts this year.

However, there are also some hopeful signs in the fight against inflation, with a report released by the US Department of Labor on Wednesday showing that indicators measuring core price pressures have slightly fallen after remaining largely unchanged for four consecutive months.

This increases the possibility of a month on month flattening of the Personal Consumption Expenditures (PCE) price index and prompts financial markets to bet that the Federal Reserve will not cut interest rates until June. The PCE Price Index is an indicator used by the Federal Reserve to measure the achievement of its 2% inflation target.

The economic resilience, the threat of widespread tariffs on imported goods, and the large-scale expulsion of illegal immigrants - actions believed to stimulate inflation - have led the Federal Reserve to anticipate a shallower path for interest rate cuts this year. President elect Trump, who will take office next week, has also promised tax cuts that will promote economic growth.

Sal Guatieri, senior economist at BMO Capital Markets, said, "The Federal Reserve has a long way to go in terms of combating inflation, which is why the Fed has changed its plan to further slow down the pace of lowering the still restrictive federal funds rate. Later this month, the Fed will hold its ground and may not cut interest rates again until the impact of the tariff policy that may begin next week on inflation becomes clearer

The US Bureau of Labor Statistics stated that the Consumer Price Index (CPI) rose 0.4% month on month in December, the largest increase since March, and a 0.3% increase in November. The cost of energy products increased by 2.6%, accounting for over 40% of the CPI increase. The 4.4% surge in gasoline prices has driven up energy prices. Energy prices increased by 0.2% month on month in November.

The December CPI increased by 2.9% year-on-year. This is the largest increase since July, with a year-on-year increase of 2.7% in November. The year-on-year increase in CPI partially reflects last year's relatively low base. Economists surveyed by Reuters previously predicted that CPI would rise by 0.3% month on month and 2.9% year-on-year.

The CPI will rise by 2.9% in 2024, lower than the 4.1% increase in 2023. The process of returning the inflation rate to the target has recently encountered obstacles. Consumer inflation expectations surged in January as households were concerned that tariffs would push up commodity prices.

The US Bureau of Labor Statistics announced on Wednesday that the core consumer price index (CPI), excluding volatile food and energy components, rose 3.2% year-on-year and is expected to grow 3.3%.

Bart Melek, head of commodity strategy at TD Securities, said: 'Core CPI is slightly lower than expected. This is a positive factor for gold... Therefore, it can be inferred that the Federal Reserve may not necessarily rule out the possibility of a rate cut. The possibility of a rate cut in January is minimal, but we expect rates to decline before the end of the year.'“

Previously, investors were concerned that the tariffs that Trump may impose upon returning to the White House next week would stimulate inflation and limit the Federal Reserve's ability to lower interest rates to a greater extent. After the release of the December CPI data in the United States, the market's concern is expected to slightly decrease.

The market currently expects the Federal Reserve to cut interest rates by 40 basis points before the end of the year, while the expectation before inflation data is released is about 31 basis points.

The US dollar index fell 0.1% and hit a one week low of 108.59 during trading, closing at 109.10, making gold more attractive to holders of other currencies. The yield of 10-year US treasury bond fell 2.82%, the biggest one-day decline since November 25, closing at 4.652%, the lowest closing price in nearly a week.

James Knightley, Chief International Economist of Dutch International Group, wrote in a research report after the release of the CPI report that the inflation trend is "still hot enough to be uncomfortable," and there is a greater possibility that the Federal Reserve's pause in interest rate hikes will be extended beyond January.

"Nevertheless, the trade weighted dollar has soared by nearly 10% since September, and the yield of treasury bond bonds has soared -- although it fell on Thursday, it still rose by more than 100 basis points compared with September -- all of which will become resistance to economic growth. (This) will help curb inflationary pressure.... And should provide greater room for the Federal Reserve to reduce interest rates in the second half of 2025."

Joseph Trevisani, Senior Analyst at FX Street, said, "The cooling inflation data is a signal for traders to reduce their long positions in the US dollar." Trevisani believes that the Federal Reserve will be very cautious about resuming interest rate cuts until it is absolutely certain that inflation will fall.

As US President elect Trump returns to the White House next week, analysts expect some of his policies to promote economic growth while also increasing price pressures.

John Velis, Head of Forex and Macro Strategy at BNY Markets in the Americas, stated that the market will focus on future inflation reports to see if they confirm the trend of gradually slowing inflation. But he added that the incoming new government is likely to enact policies that will overturn many people's baseline expectations for the first half of this year.

He said, "We expect the Federal Reserve to remain inactive on January 29th and will not resume interest rate cuts until later this year, depending on the pace of inflation slowdown

The strengthening of the US dollar will not end with these CPI readings, "said Peter Vassallo, foreign exchange portfolio manager at BNP Paribas Asset Management." This may become more subtle, and we may see the US dollar continue to strengthen against European currencies

Federal Reserve officials have stated that data shows that inflation in the United States continues to slow, but they point out that uncertainty will intensify in the coming months as they wait for the Trump administration's policies to be implemented. Richmond Fed President Barkin said that the December CPI report continues the trend that inflation is falling towards the target.

New York Fed President Williams stated that future monetary policy actions will be driven by economic data, as the Fed faces high levels of uncertainty largely caused by potential government policy changes. It is too early to assert what impact Trump's return to the presidency will have on the economy.

Chicago Fed President Goolsby said he still believes inflation is moving towards the Fed's 2% target, particularly encouraged by the recent easing of housing related inflation rates, and optimistic about the continued soft landing of the economy in 2025

There was also a series of economic data released this trading day, focusing on the monthly rate of US retail sales in December (commonly known as "terrorist data") and the change of the number of US initial jobless claims, the monthly rate of US import price index in December, and the relevant news of geographical situation.

The United States and Qatar announced on Wednesday that negotiators have reached a phased agreement to end the Gaza war between Israel and Hamas, following 15 months of bloody clashes that have resulted in tens of thousands of Palestinian deaths and heightened tensions in the Middle East.

This complex agreement outlines the arrangements for a preliminary six week ceasefire phase, including the gradual withdrawal of Israeli forces from the Gaza Strip and the release of hostages held by Hamas in exchange for Palestinian prisoners in Israeli prisons.

Qatar Prime Minister Mohammed bin Abdulrahman Al Thani announced at a press conference in Doha that a ceasefire will begin on Sunday. He said that negotiators are negotiating with Israel and Hamas on the steps to implement the agreement.

US President Biden said in Washington, "This agreement will stop the fighting in Gaza, provide much-needed humanitarian aid to Palestinian civilians, and reunite hostages who have been detained for over 15 months with their families

Palestinians celebrate on the streets of Gaza. They are facing a serious humanitarian crisis there, with severe shortages of food, water, and fuel.

The families and friends of the Israeli hostages were overjoyed upon hearing the news of the agreement reached in Tel Aviv.

The agreement was reached after months of tortuous and intermittent negotiations between Egyptian and Qatari mediators with the support of the United States, and was reached before the inauguration of US President elect Trump on January 20th.

Egyptian President Sisi also posted on X platform welcoming the agreement.

If successful, the planned phased ceasefire will put an end to the fighting, which has turned much of the highly urbanized Gaza into ruins and displaced most of the 2.3 million pre war population in this small enclave. The death toll is still increasing day by day.

The first phase of the agreement requires the release of 33 Israeli hostages, including all women, children, and men over the age of 50.

Hamas official Sami Abu Zuhri said that the agreement was a "big gain". Hamas is the dominant Palestinian armed force in Gaza, and the organization stated that its delegation has agreed to the ceasefire agreement and the return of hostages to the mediator.

On the night of the 15th local time, the Israeli Prime Minister's Office stated that Prime Minister Netanyahu had separate conversations with US President elect Trump and US President Biden regarding the Gaza ceasefire agreement. With the announcement from the Prime Minister's Office, Netanyahu publicly confirmed for the first time that Israel has accepted the Gaza ceasefire agreement to release detainees, which is expected to take effect on the 19th.