Gold Prices Rise as U.S. Inflation Data Shifts Fed Expectations

Gold prices increased in Asian trade on Thursday, remaining near record highs due to softer-than-expected U.S. consumer inflation data, which raised expectations that the Federal Reserve might start lowering rates.

Despite the gains in gold, improved risk appetite limited substantial increases. The consumer price index (CPI) showed a monthly increase, prompting traders to anticipate a smaller rate cut of 25 basis points in September.

Spot gold rose 0.2% to $2,452.56 per ounce, while gold futures increased by 0.4% to $2,490.40 per ounce as of 01:05 ET (05:05 GMT).

Gold Close to Record High, September Rate Cut in Focus

Spot gold prices approached a record high of over $2,480 this week, supported by safe haven demand amid escalating geopolitical tensions in the Middle East.

Initially, gold reacted negatively to Wednesday’s CPI data, as the month-on-month inflation increase led traders to favor a smaller, 25 basis point rate cut by the Fed in September, with CME Fedwatch showing a shift in sentiment from a 50 basis point cut.

Nevertheless, the possibility of lower interest rates supports gold prices, as reduced rates lower the opportunity cost of holding the metal. Thus, gold remains near recent peaks, further buoyed by a weaker dollar and declining Treasury yields.

Other precious metals also demonstrated gains on Thursday. Platinum futures increased by 0.5% to $935.65 an ounce, while silver futures climbed 1.6% to $27.773 an ounce.

Copper Rises Amid Mixed Chinese Data

In the industrial metals sector, copper prices climbed on Thursday amid positive economic signals from China, the leading importer. However, the metal has been facing significant losses in recent weeks.

Benchmark copper futures on the London Metal Exchange rose 0.5% to $8,991.50 a ton, with one-month copper futures also increasing by 0.5% to $4.065 a pound.

Data from China indicated improved consumer spending, with retail sales surpassing expectations for July.

However, industrial production, a vital component of China’s copper demand, grew less than anticipated, and fixed asset investment did not meet expectations either. Additionally, China’s unemployment rate unexpectedly rose.

Concerns over declining demand from China have contributed to copper’s sharp losses over the past month, especially as recent data revealed that China’s copper imports have decreased for two consecutive months.