Gold prices experienced a slight decrease in Asian trade on Friday, but continued to hover near all-time highs as investors eagerly anticipated key U.S. inflation data scheduled for later in the day.
Despite the minor decline, bullion prices were on track for significant gains in August, driven by a combination of safe haven demand and expectations of interest rate cuts that propelled the yellow metal to record levels.
Gold futures fell 0.3% to $2,514.55 per ounce, while spot gold for December delivery dropped 0.5% to $2,547.80 per ounce as of 01:08 ET (05:08 GMT).
Gold on Course for Strong August, Focus on PCE Data
In August, spot prices were poised to increase by approximately 2.8%, following a peak of $2,531.72 per ounce earlier in the month. The escalation in tensions in the Middle East contributed to safe haven demand for gold, along with a market sell-off at the start of the month. Additionally, consistent central bank purchases in emerging markets provided further support to gold prices.
The primary driver behind gold’s surge was the anticipation of lower U.S. interest rates, creating a more favorable environment for investing in the precious metal.
The upcoming release of the PCE price index data, which serves as the Federal Reserve’s preferred inflation measure, is expected to offer additional insights on interest rate movements. The data, set to be unveiled later on Friday, is projected to reveal stable inflation levels in July. This, coupled with recent indications of resilience in the U.S. economy, may diminish the urgency for drastic interest rate cuts by the Fed. The dollar strengthened in response to this outlook, heading towards a weekly increase.
Nevertheless, market participants are still pricing in a minimum 25 basis point rate cut in September, as indicated by futures markets.
Compared to gold, other precious metals such as silver and platinum displayed mixed performance on Friday, significantly trailing behind gold’s impressive rally throughout August.
Copper Strengthens on Optimism Over China Stimulus Measures
Meanwhile, copper prices saw an uptick on Friday following reports of potential stimulus actions in China, the world’s leading copper importer, which bolstered market sentiment.
The benchmark copper price on the London Metal Exchange rose by 0.5% to $9,324.50 per ton, while one-month copper futures increased by 0.8% to $4.2447 per pound.
Media outlets reported that Beijing was contemplating refinancing approximately $5.4 trillion worth of mortgages, a move expected to inject vitality into China’s struggling property market. Given that the property sector represents a significant source of copper demand in China, concerns over a slowdown in this market have sparked worries about declining copper consumption in the country.
Analysis:
In summary, gold prices experienced a minor decline in Asian trade but remained near record highs as investors awaited crucial U.S. inflation data. The strong performance of gold in August can be attributed to a mix of safe haven demand, expectations of interest rate cuts, and geopolitical tensions. The upcoming PCE data release is anticipated to shed light on the future trajectory of interest rates. Meanwhile, copper prices received a boost from reports of potential stimulus measures in China, a key driver of copper demand. This information is essential for investors looking to navigate the current market conditions and make informed decisions about their financial portfolios.