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Gold prices stabilized in Asian trading on Thursday following robust overnight gains, propelled by softer inflation data that drove the dollar to one-month lows and increased speculation of impending interest rate cuts.
With the yellow metal now within reach of May’s record highs, traders are wagering that the Federal Reserve could initiate rate cuts as early as September. Wednesday’s sharp decline in the dollar, spurred by this expectation, buoyed metal prices across the board.
Spot gold edged up 0.1% to $2,388.84 per ounce, while gold futures for June held firm at $2,393.50 per ounce by 23:43 ET (03:43 GMT).
Gold surged over 1% on Wednesday following reports of a decline in U.S. consumer price index (CPI) inflation for April compared to March, alongside a drop in core CPI from the previous month. Soft retail sales data further fueled optimism of forthcoming inflation moderation, potentially emboldening the Fed to implement rate reductions.
Traders, as per the CME Fedwatch tool, are now pricing in a higher probability of a 25 basis point rate cut in September, standing at nearly 54%.
Elevated interest rates elevate the opportunity cost of gold investment, given its lack of direct yield. However, if the U.S. economy undergoes further cooling this year, gold might attract increased safe-haven demand.
Despite market optimism, several Fed officials emphasized the necessity for greater confidence in inflation reduction before considering rate cuts, particularly as inflation remains notably above the Fed’s 2% annual target.
Platinum futures climbed 0.5% to $1,081.90 per ounce, while silver futures gained 0.2% to $29.797 per ounce.
Copper Optimism Amid China Stimulus
Industrial metal copper maintained its upward trajectory, hovering near two-year highs amid ongoing optimism regarding increased fiscal stimulus in China and bolstered support for the property market. Three-month copper futures on the London Metal Exchange surged 1% to $10,375.0 per ton, with one-month copper futures up 1.4% to $4.9915 per pound. The announcement of a significant bond issuance in China and relaxations in home buying restrictions further underscored positive sentiment in the copper market.
Investors eagerly await Chinese industrial production and retail sales data on Friday for additional insights into the world’s leading copper importer.
