Gold prices edged higher in Asian trading on Thursday, remaining close to record levels as traders anticipated that the yellow metal would continue to benefit from a lower interest rate environment.
However, expectations for a significant rate cut by the Federal Reserve diminished after core consumer price index (CPI) data for August came in higher than anticipated. Traders are now positioning for a smaller 25 basis point cut in September, which strengthened the dollar and limited gold’s gains.
Spot gold rose 0.2% to $2,516.88 per ounce, while December gold futures increased 0.1% to $2,544.55 per ounce as of 00:36 ET (04:36 GMT).
Gold hovers below record highs, with Fed meeting and PPI data ahead
Gold remains just shy of its record high of $2,532.05 per ounce, a level it nearly reached earlier this week. The metal has gained some safe-haven demand amid fears of a U.S. recession, which have unsettled risk-driven markets.
Wednesday’s CPI data led traders to reduce expectations for a 50 basis point rate cut at the Federal Reserve’s upcoming meeting, with a 25 basis point cut now the likelier outcome. The persistence of inflation reduces the urgency for the Fed to cut rates aggressively.
Before the Fed meeting, markets will also focus on producer price index (PPI) inflation data, due later on Thursday. Despite the reduced rate-cut expectations, the overall outlook remains positive for gold and other precious metals, as lower interest rates decrease the opportunity cost of holding non-yielding assets.
Platinum futures gained 0.4% to $961.85 per ounce, while silver futures rose 0.4% to $29.047 per ounce.
Copper rises on hopes of Chinese stimulus
In industrial metals, copper prices advanced on Thursday, recovering some recent losses as weak economic data from China fueled expectations for further stimulus in the world’s largest copper importer.
Benchmark copper futures on the London Metal Exchange increased 0.4% to $9,180.00 per ton, while one-month copper futures climbed 0.3% to $4.180 per pound.
Copper prices had been hit over the past week by weak Chinese economic data, raising concerns that a slowdown in the country could reduce its demand for the metal. China’s copper imports fell for the third consecutive month.
However, this has sparked hopes for additional stimulus measures from the Chinese government. Analysts at Citi suggested in a recent note that China may implement more interest rate cuts and mortgage refinancing measures to boost growth and domestic demand.
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