After soaring to a historic high of $4 356 an ounce, gold prices have sharply retreated in the run-up to today’s release of crucial inflation figures in the United States (US).

In just three days, gold has dropped by as much as 6.4%, trading at $4 078 per ounce, as investors who benefited from the recent rally are now cashing in their gains and bracing for possible market shifts.

For much of the past year, gold has been one of the most attractive assets for investors looking to hedge against global risks and policy uncertainty. Central bank buyingand safe-haven demand drove prices to record levels, particularly as global markets were concerned about the impact of new US tariffs and geopolitical risks, which have now eased.

Traders are anxious that a hotter-than-expected inflation reading could derail expectations of further rate cuts by the US Federal Reserve next week. If inflation exceeds forecasts, the dollar could strengthen further, pulling gold prices down in response.

Bheki Mahlobo, Economics and Policy Editor at The Common Sense, notes that: “there is nervousness in financial markets as investors have been left with fewer directional clues on the US economy due to the delays in data releases, therefore a surprise print on inflation would likely lead to significant volatility ahead of the weekend.”

The latest fluctuations in gold prices reflect profit-taking, and today's inflation report could influence global markets as the year draws to a close.