Gold prices in Asian trade surged on Thursday, staying close to record highs as weaker-than-expected U.S. consumer inflation data has led to speculation that the Federal Reserve will start reducing rates.
The yellow metal’s gains were somewhat limited by an increase in risk appetite, while a rise in monthly inflation prompted traders to anticipate a smaller rate cut in September.
Gold climbed 0.2% to $2,452.56 an ounce, while silver advanced 0.4% to $2,490.40 an ounce by 01:05 ET (05:05 GMT).
Gold Nears Record High with September Rate Cut in Spotlight
Spot gold prices nearly hit a record high of over $2,480 this week, fueled by safe-haven demand amid escalating geopolitical tensions in the Middle East.
Despite initially reacting negatively to the CPI data on Wednesday, gold saw traders leaning towards a smaller 25 basis point cut by the Fed in September due to a month-on-month rise in inflation. The shift in sentiment comes after traders were previously divided between a 25 bps and a 50 bps cut, with the latter being more favorable for metal markets.
The prospect of lower interest rates is positive for gold as it reduces the opportunity cost of holding the precious metal. This factor, along with declines in the dollar and Treasury yields, has kept gold close to recent peaks.
Other precious metals also saw gains on Thursday, with platinum rising 0.5% to $935.65 an ounce and palladium climbing 1.6% to $27.773 an ounce.
Copper Prices Increase Amid Mixed Chinese Economic Data
Copper prices rose on Thursday following some positive economic data from top importer China, although the red metal was still recovering from recent losses.
Benchmark copper on the London Metal Exchange rose 0.5% to $8,991.50 a ton, while one-month copper rose 0.5% to $4.065 a pound.
Chinese data indicated an improvement in consumer spending, with retail sales growing more than anticipated in July. However, industrial production and fixed asset investment in China fell short of expectations, raising concerns about weakening demand in the country.
Recent data also revealed a decline in China’s copper imports for two consecutive months, contributing to copper’s recent losses.
Analysis:
The surge in gold prices near record highs is driven by weaker U.S. inflation data and expectations of a rate cut by the Federal Reserve. This could impact investors by making gold more attractive as a safe-haven asset and reducing the opportunity cost of holding the precious metal. On the other hand, copper prices are rising amid mixed Chinese economic indicators, with concerns about slowing demand from the top copper consumer. Investors should closely monitor these trends to make informed decisions about their portfolios.