Gold prices showed a modest recovery on Monday, seeking to regain some ground after facing significant declines in the past week. The movement in gold came amidst a backdrop of cautious anticipation ahead of crucial economic readings expected from the United States and China.
In recent sessions, rising U.S. Treasury yields, driven by apprehensions of elevated interest rates and a U.S. credit ratings downgrade, exerted downward pressure on gold prices. Additionally, a resurgence in the strength of the dollar contributed to the recent slump in gold.
Although the precious metal experienced a slight reprieve on Friday following disappointing nonfarm payrolls data, its overall performance for the week left it down by around 1%, marking its poorest showing in over a month.
As of 20:46 ET (00:46 GMT), spot gold witnessed a marginal increase of 0.1%, reaching $1,945.03 per ounce. Simultaneously, gold futures set to expire in December exhibited a modest rise of 0.2%, reaching $1,979.60 per ounce.
Attention within metal markets has now shifted to the eagerly awaited U.S. Consumer Price Index (CPI) inflation data scheduled for release on Thursday, serving as a pivotal barometer of the world’s largest economy. A potential uptick in inflation after a notable decline in June could fuel expectations of further interest rate hikes by the Federal Reserve.
Should a robust inflation reading materialize, gold is expected to face further retreat, potentially leading to a strengthening of the dollar. The specter of prolonged higher U.S. interest rates has significantly influenced gold’s recent trajectory, with traders demonstrating a preference for the dollar even in the wake of Fitch’s downgrade of the U.S. sovereign rating.
This downgrade from Fitch also triggered a pronounced surge in U.S. Treasury yields, thereby placing downward pressure on non-yielding assets such as gold.
Meanwhile, other precious metals exhibited a mixed performance on Monday, echoing the volatile trends of the past week. Platinum futures marked a modest uptick of 0.4%, while silver, in contrast, registered a slight decline of 0.2%.
Turning attention to copper, prices experienced a marginal dip on Monday, with investors keenly awaiting a series of forthcoming Chinese economic indicators. Copper futures dipped by 0.1%, reaching $3.8500 per pound.
China, being the largest global copper importer, is poised to unveil critical inflation and trade data later in the week. These readings are anticipated to provide further insights into the trajectory of the country’s economic recovery. Despite steady copper imports, mounting concerns about deteriorating economic conditions in China have heightened apprehensions about potential future demand.
Recent data releases have also highlighted a subdued start to the third quarter for the Chinese economy, further contributing to the air of caution prevailing among market participants.