Gold prices hovered near $2,400 as attention turned to CPI data influencing potential rate cuts

In Asian trading on Thursday, gold prices stabilized following significant gains overnight, driven by weaker inflation figures that dragged the dollar to one-month lows, heightening expectations of forthcoming interest rate reductions.

Approaching the record highs achieved in May, the precious metal saw renewed interest from traders anticipating rate cuts by the Federal Reserve, possibly as early as September. Wednesday witnessed a sharp decline in the dollar as markets absorbed this speculation, consequently bolstering metal prices across the board.

At 23:43 ET (03:43 GMT), spot gold inched up 0.1% to $2,388.84 per ounce, while gold futures expiring in June remained steady at $2,393.50 per ounce.

Gold‚s surge followed a 1% rebound from Wednesday, fueled by data revealing a moderation in U.S. consumer price index inflation in April compared to March, with core CPI also dipping from the previous month. These figures, coupled with softer-than-anticipated retail sales data, bolstered expectations of easing inflation in the near future, potentially emboldening the Fed to pursue rate adjustments.

The CME Fedwatch tool reflected increased trader sentiment, with nearly 54% now pricing in a 25 basis point cut come September.

Higher interest rates traditionally elevate the opportunity cost of investing in assets like gold, which offer no direct yield. Furthermore, the yellow metal could see heightened safe haven demand should the U.S. economy experience further cooling throughout the year.

Despite these indicators, numerous Fed officials cautioned in recent days that the central bank required more assurance of declining inflation, which still comfortably exceeded the Fed’s 2% annual target.

Meanwhile, other precious metals saw gains as well, with platinum futures climbing 0.5% to $1,081.90 per ounce, and silver futures edging up 0.2% to $29.797 per ounce.

In the realm of industrial metals, copper prices surged on Thursday, maintaining over two-year highs amid ongoing optimism surrounding potential fiscal stimulus in China and increased support for the property market. Three-month copper futures on the London Metal Exchange rose 1% to $10,375.0 per ton, with one-month copper futures increasing by 1.4% to $4.9915 per pound, both nearing peaks observed in April 2022.

China’s announcement of a substantial 1 trillion yuan ($138 billion) bond issuance this week, alongside relaxations of home-buying restrictions in several major cities to boost the property market, further fueled market optimism.

Investors now await Chinese industrial production and retail sales data, slated for release on Friday, for additional insights into the world’s largest copper importer.

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