Investing.com– Gold Prices Rise Amid Interest Rate Speculation

Gold prices increased in Asian trade on Thursday, nearing record highs as traders anticipated benefits from a lower interest rate environment.

However, bets on significant interest rate cuts by the Federal Reserve waned after the core consumer price index (CPI) inflation for August exceeded expectations. As a result, traders adjusted their positions for a smaller, 25 basis point reduction later in September, which supported the dollar and restricted gold's climb.

Spot gold rose 0.2% to $2,516.88 per ounce, while December gold futures climbed 0.1% to $2,544.55 per ounce by 00:36 ET (04:36 GMT).

Gold Stalls Below Record Highs with Fed, PPI Inflation Ahead

Spot gold was trading just below its record high of $2,532.05 per ounce, after nearly reaching that level earlier this week. The yellow metal benefitted from heightened safe haven demand over the past week, particularly in light of fears surrounding a potential U.S. recession impacting risk-driven markets.

Wednesday’s CPI data led traders to significantly reduce expectations for a 50 basis point rate cut at the upcoming Fed meeting, adjusting to anticipate a 25 basis point reduction instead, according to CME Fedwatch.

The ongoing inflation trend presents less of a case for the Fed to make steep interest cuts.

Before next week’s Fed meeting, markets will also consider producer price index (PPI) inflation data, expected later on Thursday.

Nevertheless, the prospect of lower rates continues to favor gold and precious metals, as it diminishes the opportunity cost of investing in assets that yield no income.

Platinum futures increased by 0.4% to $961.85 per ounce, while silver futures also rose by 0.4% to $29.047 per ounce.

Copper Prices Rise on China Stimulus Hopes

In industrial metals, copper prices rebounded on Thursday, recovering some recent losses amid weak economic indicators from China that heightened expectations for further stimulus in the world’s largest copper importer.

Benchmark copper futures on the London Metal Exchange increased by 0.4% to $9,180.0 per ton, while one-month copper futures rose by 0.3% to $4.180 per pound.

Weak economic data from China has weighed on copper prices in recent weeks, with concerns that a slowdown in the nation will decrease copper demand. China’s copper imports have also declined for three consecutive months.

However, this has fueled optimism for additional stimulus measures. Analysts at Citi have suggested the government is poised to implement further interest rate cuts and mortgage refinancing strategies to counteract slowing growth and bolster local demand.