• Gold price languishes near its lowest level since January amid sustained US Dollar buying.
• Tuesday’s US CPI reaffirms Federal Reserve’s hawkish outlook and underpins the greenback.
• Recession fears weigh on investors’ sentiment and could lend some support to Gold price.

Gold price comes under some renewed selling pressure on Wednesday and remains on the defensive heading into the European session. The XAU/USD is currently placed just below the $1,845 level, flirting with its lowest level since January 6 touched in the last hour, and seems vulnerable to decline further.

Stronger US Dollar drive flows away from Gold price

The US Dollar (USD) stands tall near a multi-week high amid expectations that the Federal Reserve (Fed) will stick to its hawkish stance in the wake of stubbornly high inflation. This, in turn, is seen as a key factor driving flows away from the US Dollar-denominated Gold price. The market bets that interest rates are going to remain higher for longer were lifted by data, showing that the headline Consumer Price Index (CPI) in the United States (US) rose in line with expectations, by 0.5% in January. On an annualized basis, US CPI eased from 6.5% to 6.4% during the reported month, though remained above consensus estimates for a reading of 6.2%. More importantly, Core CPI which excludes food and energy prices, also came in higher-than-anticipated, at a 5.6% YoY rate.

Hawkish Federal Reserve officials further weigh on Gold price

Adding to this, FOMC members stressed the need to keep raising rates gradually to beat inflation. In fact, Richmond Fed President Thomas Barkin told Bloomberg TV that inflation is normalizing but it’s coming down slowly. If it persists at levels well above the target, the Fed will have to raise rates to a higher level than previously anticipated, Barkin added. Separately, Dallas Fed President Lorie Logan said, “we must remain prepared to continue rate increases for a longer period than anticipated." Adding to this, New York Fed President John Williams flagged a prolonged battle against inflation over the coming months. The markets were quick to price in at least 25 bps lift-off at each of the next two Federal Open Market Committee (FOMC) meetings in March and in May.