Gold on the Rise: Record Highs Loom as CPI Data Increase Rate Cut Hopes
As predictions that the Federal Reserve will start reducing rates grew in response to less-than-expected U.S. consumer inflation statistics, gold prices increased in Asian trade on Thursday and remained near record highs.
Better risk appetite also restrained gains in the yellow metal, and traders were positioning for a more modest rate decrease in September as a result of a monthly uptick in the consumer price index inflation.
By 01:05 ET (05:05 GMT), gold futures increased 0.4% to $2,490.40 an ounce, while spot gold increased 0.2% to $2,452.56 an ounce.
Gold is nearing a new high, with a focus on September rates.
This week, spot gold prices nearly reached a record high of $2,480 due to growing demand for safe haven assets amid escalating geopolitical concerns in the Middle East.
However, gold had initially shown a negative response to the CPI data on Wednesday, as traders were leaning toward a lower, 25 basis point reduction by the Fed in September due to a month-over-month increase in inflation, according to CME Fedwatch. The tool had previously shown that traders were divided between a 25 bps cut and a 50 bps cut, with the latter offering a metal markets view that was more positive.
Nevertheless, given that lower rates cut the opportunity cost of investing in the yellow metal, the likelihood of lower interest rates is positive for gold. This prevented the yellow metal from reaching previous highs, and it also caused Treasury yields and dollar losses.
On Thursday, other precious metals saw gains as well. Silver futures increased 1.6% to $27.773 an ounce, while platinum futures increased 0.5% to $935.65 an ounce.
Copper gains on conflicting Chinese data
Among industrial metals, copper prices increased on Thursday as a result of some encouraging economic data from China, the main importer, even if the red metal has been suffering sharp losses lately.
One-month copper futures increased by 0.5% to $4.065 a pound on the London Metal Exchange, while benchmark copper futures increased by 0.5% to $8,991.50 a ton.
Retail sales in July grew more than anticipated, according to data from China, suggesting that consumer spending has somewhat improved.
However, both fixed asset investment and industrial production—two major factors driving China’s copper demand—grew less than anticipated. Unexpectedly, China’s unemployment rate also rose.
Over the past month, copper has experienced sharp losses due to worries about decreasing Chinese demand, especially since recent statistics also revealed that China’s imports of copper had decreased over the past two months.
