Gold prices in Asia rebounded after U.S. inflation data caused a sharp drop from record highs. However, safe-haven demand and central bank buying have helped keep prices near recent peaks.
The yellow metal took a hit in U.S. trade on Wednesday when consumer price index data revealed higher-than-expected U.S. inflation for March, which remained stubbornly high.
The surge in inflation pushed the U.S. dollar to five-month highs, putting pressure on gold prices. Spot prices for gold fell by 0.8% on Wednesday after reaching all-time highs earlier in the week.
Despite the setback, gold bounced back in Asian trade due to signs of ongoing economic weakness in China, fueling safe-haven demand for the precious metal.
Gold futures rose 0.5% to $2,345.31 an ounce, while futures expiring in June increased by 0.6% to $2,362.10 an ounce by 00:17 ET (04:17 GMT). Spot prices remained approximately $20 below the record high of $2,365.34 reached earlier in the week.
US rate fears impacting gold prices
Although gold staged a rebound on Thursday, the outlook for the metal is somewhat murky due to concerns about potentially higher U.S. interest rates in the future.
The Federal Reserve minutes, released on Wednesday, indicated growing Fed officials’ worries about persistent inflation and the need for tighter monetary policy.
The expectation of higher interest rates could restrain further gold price gains since it raises the opportunity cost of investing in gold. Following Wednesday’s release of data, traders reduced their expectations for a rate cut in June.
On the flip side, gold is experiencing increased safe-haven demand amidst global economic uncertainty. Major central banks in Asia and other emerging markets have been increasing their gold reserves in recent months, contributing to price support. The People’s Bank of China’s consistent gold purchases over the past 17 months reflect heightened risk aversion.
China’s economy demonstrated ongoing weakness as recent data indicated a continued deflationary trend in the country.
Other precious metals also made a recovery from overnight losses, with silver rising by 0.4% to $980.85 an ounce, and platinum stabilizing at $28.043 an ounce.
Copper makes gains amid Chinese economic concerns
Copper prices, an industrial metal, recovered from overnight losses, albeit facing limitations due to weak economic data from top importer China.
On the London Metal Exchange, copper rose by 0.2% to $9,430 a ton, while nickel increased by 0.3% to $4.2897 a pound.
Both contracts remained below recent 15-month highs following weak Chinese inflation data, as inflation decreased for the 18th consecutive month.
Nonetheless, they held onto most of their recent gains amid expectations of production cuts by Chinese refiners tightening copper markets this year.
