In Asian trading on Thursday, gold prices showed minimal movement, holding steady near three-week lows and contending with pressure from the U.S. dollar following data that revealed a larger-than-anticipated increase in U.S. inflation.
Despite a robust U.S. consumer inflation reading on Wednesday, gold managed to maintain its position. The prevailing market sentiment suggests that the Federal Reserve is likely to keep interest rates unchanged at its upcoming meeting next week.
However, the ability of gold prices to sustain levels around $1,900 per ounce remains uncertain due to expectations of higher U.S. interest rates in the long term. The U.S. dollar is also holding steady, trading below its near six-month high, which limits the potential for significant gains in gold.
Diminished concerns about a U.S. recession have weighed on safe-haven demand for gold, as recent data indicates continued resilience in the world’s largest economy. Later on Thursday, U.S. producer inflation and retail sales data are expected to provide further signals of economic strength.
In the Asian trading session, spot gold saw a modest 0.1% increase, reaching $1,910.09 per ounce, while gold futures expiring in December experienced a slight 0.1% decline, settling at $1,931.25 per ounce as of 04:22 GMT. Both instruments are trading near their lowest levels since late August.
Investor focus is now on the upcoming Federal Reserve meeting and its outlook on interest rates. The recent surge in consumer inflation has led to expectations of a more hawkish stance from the central bank, particularly with inflation trending upward.
Market consensus anticipates the Federal Reserve will maintain interest rates at over 20-year highs until at least mid-2024, painting a subdued outlook for gold. The precious metal has faced challenges from rising interest rates over the past year, as higher rates increase the opportunity cost of holding non-yielding assets like gold, making them less attractive in comparison to the U.S. dollar or Treasuries.
Meanwhile, in the realm of industrial metals, copper prices recorded a 0.6% increase on Thursday. This upward movement was aided by a weaker U.S. dollar and the anticipation of further signals from China, the world’s largest copper importer.
Copper futures surged to $3.8045 per pound, rebounding strongly after two consecutive days of losses. For the week, futures were also on an upward trajectory due to positive signals from China, where inflation and new loans data indicated signs of an economic recovery.
Market attention now shifts to additional cues from China, with reports on industrial production and retail sales scheduled for release on Friday. While China’s copper imports faced a decline earlier this year amid deteriorating economic conditions, copper bulls are betting that an economic resurgence in the country will rekindle demand for the red metal.
