Gold prices showed little movement on Thursday, facing headwinds from a stronger dollar and rising Treasury yields. Concerns regarding sticky inflation and the Federal Reserve’s hawkish stance weighed on the precious metal.
Data indicated a degree of resilience in the U.S. economy, eroding the safe-haven appeal of gold. There is a growing belief that the United States will manage to avoid a recession this year.
However, the focus of concern in the gold markets remains U.S. interest rates, with several Federal Reserve speakers scheduled ahead of an interest rate decision later this month.
Spot gold managed a modest 0.1% uptick to reach $1,919.32 per ounce, while gold futures expiring in December dipped by 0.1% to $1,943.30 per ounce as of 00:58 ET (04:58 GMT). Both assets were hovering just above their lowest levels in the past 10 days.
U.S. Rate Concerns Heighten After Strong Service Sector Data
Wednesday’s data revealed that U.S. service sector activity exceeded expectations in August. However, one particular aspect raised eyebrows in the market – an increase in service sector prices. This development is likely to contribute to sustained inflation pressures in the upcoming months.
This reading, coupled with a recent spike in oil prices, has reignited concerns that U.S. inflation will remain persistent throughout the year, prompting a more hawkish stance from the Federal Reserve.
While it is widely anticipated that the Fed will maintain rates in September, the central bank is also expected to prolong the duration of higher rates.
The outlook for gold appears dim in light of these potential higher rates, as they elevate the opportunity cost of holding bullion. Additionally, a stronger dollar tends to erode the per-ounce value of gold.
This scenario has weighed heavily on gold throughout the past year, casting a shadow over its future prospects.
Copper Prices Slide Amid Weak Chinese Trade Data
In the realm of industrial metals, copper prices retreated on Thursday following the release of Chinese trade data, which suggested ongoing economic challenges in the world’s largest copper importer.
Copper futures fell by 0.4% to $3.7757 per pound, marking a two-week low.
Chinese data revealed that while imports and exports experienced a slower contraction than expected in August, they still remained near historic lows. Notably, China’s copper imports declined by approximately 5% compared to the previous year, signaling waning demand for the red metal amidst worsening economic conditions.
China’s copper imports have witnessed a slowdown in recent months as the nation grapples with a decline in manufacturing activity and a severe liquidity crisis in its extensive property market.
