Gold prices saw a marginal decline in Asian markets on Wednesday but held steady within striking distance of record levels as investors positioned themselves for potential signs of easing consumer inflation following a subdued producer inflation report.
The US dollar approached its lowest point in eight months after a lackluster inflation report on Tuesday, providing support to most metal prices. However, further advances in metal markets were tempered by a sense of caution ahead of the upcoming consumer price index (CPI) release.
Spot gold slipped by 0.2% to $2,461.11 per ounce, while December gold futures slid by 0.3% to $2,500.40 per ounce by 00:43 ET (04:43 GMT). The yellow metal remained within reach of its record highs, with futures hitting unprecedented levels this week while spot prices edged closer to the $2,483.78 milestone.
The recent uptick in gold prices followed a soft producer price index (PPI) inflation reading on Tuesday, which reinforced expectations of a potential 50-basis-point interest rate cut by the Federal Reserve in September. Market sentiment, however, still factored in the possibility of a more conservative 25 bps reduction.
Encouraged by the subdued PPI figures, market participants are hopeful that the CPI data slated for release later on Wednesday will mirror a decline in inflation levels for July.
Lower interest rates are seen as a positive development for gold as they reduce the opportunity cost associated with investing in non-yielding assets.
Gold also witnessed increased demand as a safe-haven asset this week following reports suggesting retaliatory actions by Iran against Israel in response to the killing of a Hamas leader in Tehran earlier this month. Recent incidents, including reports of rocket launches by Hamas towards Tel Aviv, have heightened geopolitical tensions in the region.
In the broader metal market landscape on Wednesday, platinum futures dipped by 0.7% to $939.95 per ounce, while silver futures inched up by 0.2% to $27.832 per ounce.
Meanwhile, copper prices initially faced a decline on Wednesday but managed to recover some lost ground in recent sessions following a significant union strike at BHP’s Escondida mine in Chile, a key player in global copper supply, accounting for nearly 5% of the total.
Production disruptions at the mine pose the risk of a supply shortfall in copper markets, particularly if the strike extends further. Notably, copper prices experienced a notable surge in 2017 after a 44-day strike at the same mine, marking the longest strike by the union.
Benchmark copper futures on the London Metal Exchange dipped by 0.2% to $8,963.0 per ton, while one-month copper futures slipped by 0.4% to $4.0450 per pound.
Both copper contracts have seen some recovery this week after concerns surrounding Chinese demand led copper prices to a four-month low. Market participants are now looking towards upcoming economic data from China, including industrial production and retail sales figures scheduled for release on Thursday, for further market insights.
