Gold prices exhibited minimal movement during Asian trading on Thursday, stabilizing near three-week lows while grappling with dollar pressure in light of a larger-than-anticipated surge in U.S. inflation data.
Despite the robust U.S. consumer inflation reading released on Wednesday, the precious metal managed to retain its position. Market sentiment is that the Federal Reserve will maintain interest rates at their current levels during its upcoming meeting next week.
However, the ability of gold prices to sustain the $1,900 per ounce level remains uncertain due to expectations of prolonged higher U.S. interest rates. Additionally, the dollar remains firm, hovering just below a nearly six-month high, thereby limiting any significant upswing in gold.
The reduced likelihood of a U.S. recession has diminished safe-haven demand for gold, as recent data indicates ongoing resilience in the world’s largest economy.
Later on Thursday, the release of U.S. producer inflation and retail sales data is anticipated, and these indicators are expected to further reflect economic resilience.
Spot Gold Shows Slight Uptick, Gold Futures Weaken
In Asian trading, spot gold experienced a marginal 0.1% rise, reaching $1,910.09 per ounce, while gold futures set to expire in December slipped by 0.1% to $1,931.25 per ounce at 0:22 ET (04:22 GMT). Both instruments continued to hover near their lowest levels since late August.
Focus on Fed Meeting and Rate Outlook
The recent robust consumer inflation reading comes merely a week before the Federal Reserve’s scheduled meeting, widely anticipated to result in interest rates being held steady.
However, the central bank might adopt a more hawkish stance, particularly in light of the resurgence in inflation.
Market expectations also point to the Fed maintaining interest rates at their highest levels in over 20 years, at least until mid-2024, which presents a subdued outlook for gold. Over the past year, the precious metal has been adversely affected by rising interest rates.
Increasing interest rates elevate the opportunity cost of investing in non-yielding assets such as gold, thereby constraining gold’s allure when compared to the dollar or Treasury investments.
Copper Gains Momentum, Awaits Signals from China
Among industrial metals, copper prices surged by 0.6% on Thursday, capitalizing on a weakened dollar. Market participants also eagerly await further cues from the world’s largest copper importer.
Copper futures saw a 0.6% jump, reaching $3.8045 per pound, marking a sharp rebound following two consecutive days of losses. Futures have also shown weekly gains as inflation and new loan data from China suggest signs of economic recovery.
Attention has now shifted to China, with readings on industrial production and retail sales expected to be released on Friday.
Despite a steady decline in China’s copper imports this year amid deteriorating economic conditions, copper bulls remain optimistic that an economic revival in the country will reignite demand for the red metal.
