Gold prices stabilized in Asian trading on Thursday following robust gains overnight, driven by softer inflation data that pushed the dollar to one-month lows and heightened expectations of impending interest rate cuts.
The yellow metal is approaching record highs reached in May, buoyed by growing speculation that the Federal Reserve could initiate rate cuts as early as September. The dollar’s decline on Wednesday, prompted by these rate cut expectations, supported broader metal prices.
Spot gold edged up by 0.1% to $2,388.84 per ounce, while gold futures expiring in June held steady at $2,393.50 per ounce by 23:43 ET (03:43 GMT).
Gold Surges Amid Easing CPI and Rate Cut Bets
Gold prices rebounded by over 1% from Wednesday’s levels following reports of softer U.S. consumer price index (CPI) inflation in April compared to March, with core CPI also showing a decline from the previous month.
These readings, combined with weaker-than-expected retail sales data, have heightened expectations that inflation will continue to ease, providing the Federal Reserve with greater confidence to commence rate reductions.
According to the CME Fedwatch tool, traders are now pricing in a higher likelihood of a 25 basis point rate cut in September, with odds nearing 54%.
The opportunity cost of investing in gold and other precious metals is influenced by higher interest rates, given their lack of direct yield. Additionally, gold may experience increased safe haven demand if the U.S. economy shows signs of cooling later this year.
Despite these factors, several Fed officials have expressed caution over the past week, emphasizing the need for greater confidence in declining inflation trends. Inflation levels also remain comfortably above the Fed’s 2% annual target.
Rise in Other Precious Metals and Industrial Metals
In addition to gold, other precious metals advanced in trading. Platinum futures rose by 0.5% to $1,081.90 per ounce, while silver futures increased by 0.2% to $29.797 per ounce.
Meanwhile, copper prices climbed to over two-year highs amid ongoing optimism surrounding increased fiscal stimulus in China and supportive measures for the property market. Three-month copper futures on the London Metal Exchange surged by 1% to $10,375.0 per ton, while one-month copper futures rose by 1.4% to $4.9915 per pound.
China’s announcement of a substantial bond issuance and relaxation of home buying restrictions in major cities contributed to the positive sentiment. Market participants are now eagerly awaiting Chinese industrial production and retail sales data, scheduled for release on Friday, to gain further insights into the world’s largest copper importer.
