May 16 2024: Gold prices remained steady in Asian trade on Thursday, following significant gains overnight driven by softer inflation data that pulled the dollar to one-month lows and heightened expectations of interest rate cuts.
The yellow metal is once again nearing record highs set in May, with traders increasingly betting on the Federal Reserve cutting rates by September. The dollar’s sharp decline on Wednesday supported broader metal prices.
Spot gold rose 0.1% to $2,388.84 an ounce, while gold futures for June steadied at $2,393.50 an ounce by 23:43 ET (03:43 GMT).
Gold Surges as CPI Eases and Rate Cut Bets Increase
Gold prices surged over 1% on Wednesday after U.S. consumer price index (CPI) data for April showed a slowdown in inflation compared to March, with core CPI also declining from the previous month.
These readings, along with weaker-than-expected retail sales data, raised hopes that inflation will continue to ease, potentially prompting the Fed to reduce rates. The CME Fedwatch tool indicated that traders now see a nearly 54% chance of a 25 basis point rate cut in September.
High interest rates increase the opportunity cost of investing in gold and other precious metals, which do not yield returns. The yellow metal could also attract more safe-haven demand if the U.S. economy weakens further this year.
Despite this optimism, several Fed officials have recently warned that more evidence of declining inflation is needed before considering rate cuts. Inflation remains well above the Fed’s 2% annual target.
Other precious metals also saw gains, with platinum futures rising 0.5% to $1,081.90 an ounce and silver futures up 0.2% to $29.797 an ounce.
Copper Prices at 2-Year High on China Stimulus Hopes
Among industrial metals, copper prices climbed on Thursday, maintaining over two-year highs amid ongoing optimism about additional 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 a ton, while one-month copper futures increased 1.4% to $4.9915 a pound. Both contracts are near peaks seen in April 2022.
Beijing announced a substantial 1 trillion yuan ($138 billion) bond issuance this week, and several major cities relaxed home-buying restrictions to boost the property market. Upcoming Chinese industrial production and retail sales data, expected on Friday, will provide further insights into the world’s largest copper importer.