Gold prices dipped slightly in Asian trade on Friday, but remained buoyed by strong gains from the prior session. The softer-than-expected U.S. inflation data increased expectations of a September interest rate cut, providing support to the precious metal.
Gold’s Surge Towards Record High
The yellow metal surpassed the $2,400 an ounce level on Thursday and was inching closer to a record high, benefiting from a significant decline in the dollar. Gold was also poised for a robust weekly performance.
In Asian trade, gold futures fell 0.3% to $2,408.52 an ounce, while spot gold prices expiring in August also dropped 0.3% to $2,413.75 an ounce by 00:06 ET (04:06 GMT).
Gold’s Weekly Gains Fueled by Rate Cut Expectations
Spot prices were on track to add approximately 0.7% for the week, with most of the gains coming on Thursday. The U.S. inflation data released on Thursday was slightly below expectations, leading to speculations that cooling inflation would prompt the Federal Reserve to initiate interest rate cuts.
Market sentiment was reflected in the weakening of the dollar and the stock market, which in turn boosted the demand for gold. Traders were increasingly factoring in the likelihood of a 25 basis point rate cut in September, with the probability rising to over 82% from around 64% the previous week.
The potential for lower interest rates reduces the opportunity cost of investing in non-yielding assets like gold, as high rates make cash or debt investments more appealing. This positive backdrop continued to support gold prices, with other precious metals also benefiting from the prospect of rate cuts.
Silver prices retreated by 0.4% to $1,015.10 an ounce, while platinum fell by 0.7% to $31.457 an ounce.
Copper Prices Decline on Weak Chinese Imports
On the industrial metals front, copper prices dipped on Friday following data that revealed a decrease in imports to China, the largest copper importer globally.
The benchmark copper price on the London Metal Exchange dropped by 0.3% to $9,761.50 a tonne, while one-month copper futures fell by 0.7% to $4.4977 a pound.
China’s imports of unwrought copper and copper products declined by 3% year-on-year to 436,000 metric tons in June, as indicated by government data released on Friday. The shrinking imports, coupled with unexpectedly contracting Chinese exports in June, raised concerns about weak local demand and a sluggish economic recovery in the country.
Despite these challenges, China’s producer price index surged to a near two-year high, while consumer prices also exceeded expectations. However, the imposition of higher trade tariffs on key Chinese exports, such as electric vehicles, could counterbalance these positive indicators.
All eyes are now on the upcoming Third Plenum of the Chinese Communist Party for additional insights on the economy and potential stimulus measures. The meeting is scheduled to convene next week.
