Gold prices exhibited little movement on Tuesday, with the dollar stabilizing after recent fluctuations, just ahead of the release of crucial U.S. inflation data later in the week. Meanwhile, copper prices maintained their recent gains, buoyed by optimism regarding China’s economic outlook.
In recent sessions, bullion prices had found relief as the dollar pulled back from its nearly six-month high due to some profit-taking. However, the greenback regained its footing in Asian trading on Tuesday, remaining in proximity to recent highs.
The outlook for U.S. inflation and interest rates remains a dominant factor, indicating potential downward pressure on gold prices in the coming months. Over the past year, rising interest rates had negatively impacted gold as they increased the opportunity cost of investing in the precious metal.
Spot gold remained steady at $1,922.61 per ounce, while gold futures expiring in December experienced a marginal 0.1% decline, settling at $1,945.35 per ounce by 00:54 ET (04:54 GMT).
Attention Now on U.S. CPI and Fed Meeting The focal point of attention is squarely on the Consumer Price Index (CPI) inflation reading for August, expected to reveal a faster pace of inflation compared to July. Elevated fuel costs and robust retail spending are believed to have contributed to this rise in U.S. inflation.
This reading is poised to set the tone for the upcoming Federal Reserve meeting, where higher inflation could provide added impetus for the central bank to maintain or even raise interest rates later this year.
While the Federal Reserve is widely anticipated to keep rates unchanged in September, a more robust inflation reading might prompt a more hawkish stance from the Fed. Moreover, the central bank is committed to maintaining rates at levels not seen in over 20 years, at least until mid-2024.
In such a scenario, gold faces a challenging outlook, given the likelihood of further increases in the dollar and Treasury yields in a high-interest-rate environment. Diminishing concerns about a U.S. recession have also curbed the safe-haven appeal of gold, although trade tensions between the U.S. and China have provided some support to the precious metal.
Copper Maintains Gains Amid Positive Sentiment in China In the realm of industrial metals, copper prices continued their ascent on Tuesday, benefiting from encouraging economic indicators in China.
Copper futures registered a 0.1% increase, reaching $3.8057 per pound, following a prior-session rally of over 1%.
Data released on Monday demonstrated significant improvement in lending activity in China throughout August, supported by ongoing monetary measures from the government.
These positive indicators followed data from the weekend that indicated Chinese consumer inflation had rebounded from deflationary territory in August. These developments fostered optimism that China’s economy was on the path to recovery following a challenging year marked by a severe slowdown.
Nevertheless, market sentiment toward the world’s largest copper importer remained somewhat cautious. A Reuters poll indicated that China’s economy is anticipated to grow by 5% in 2023, aligning with a conservative government projection, with further slowing expected in 2024.