Gold prices increased during Thursday’s Asian trading session, hovering near record highs as traders anticipate benefits from a lower interest rate environment.
However, expectations for a substantial rate cut by the Federal Reserve have diminished significantly following higher-than-expected core consumer price index (CPI) inflation data for August. This shift in sentiment has led traders to adjust their positions for a smaller, 25 basis point reduction in the Fed‘s upcoming September meeting. Consequently, the stronger US dollar has capped gold’s gains.
Spot gold rose 0.2% to $2,516.88 per ounce, while December gold futures gained 0.1%, reaching $2,544.55 per ounce by 00:36 ET (04:36 GMT). Despite these increases, gold prices remain just below their record high of $2,532.05 per ounce, which was nearly touched earlier this week.
The yellow metal has seen increased safe-haven demand over the past week, driven by recession fears impacting risk-driven markets. However, Wednesday’s CPI data prompted traders to lower expectations for a 50 basis point rate cut, with the Fed now anticipated to implement a 25 basis point reduction, according to CME FedWatch.
The persistent inflation data reduces the Fed’s impetus for a more aggressive rate cut. Market participants are now awaiting the Producer Price Index (PPI) inflation data, due later on Thursday, for further insights.
Despite these headwinds, the potential for lower rates continues to create a favorable outlook for gold and other precious metals by reducing the opportunity cost of holding non-yielding assets.
In related markets, platinum futures increased by 0.4% to $961.85 per ounce, and silver futures rose 0.4% to $29.047 per ounce.
Copper Prices Climb on Stimulus Hopes
In the industrial metals sector, copper prices rebounded on Thursday, recovering some of their recent losses amid expectations of increased stimulus measures in China, the world’s largest copper importer.
Benchmark copper futures on the London Metal Exchange gained 0.4% to $9,180.00 per ton, while one-month copper futures rose 0.3% to $4.180 per pound.
Recent weak economic data from China had previously pressured copper prices, as fears of a slowdown dampened expectations for copper demand. China’s copper imports have also declined for the third consecutive month. However, the prospect of additional stimulus measures, including potential interest rate cuts and mortgage refinancing, has fueled optimism. Analysts at Citi have suggested that the Chinese government is likely to implement such measures to support slowing growth and boost local demand.
