As investors reevaluated how far U.S. interest rates will rise in the next months in response to softer-than-expected U.S. inflation statistics, gold prices marginally increased on Friday, remaining close to one-month highs.
After bouncing back rapidly from the $1,900 per ounce support, the yellow metal was on track for its greatest weekly gain since late April. This was because both producer and consumer inflation data for June came in less than anticipated.
The data caused investors to lower their forecasts for additional Federal Reserve rate increases this year, which improved the outlook for gold and other non-yielding assets.
Gold and other commodities priced in dollars profited from the dollar’s decline to 15-month lows.
As of 00:53 ET (04:53 GMT), gold futures were up 0.1% to $1,965.25 per ounce, while spot gold barely changed at $1,961.24 per ounce. This week, both securities were expected to increase by almost 2%.
Traders questioned whether the Fed would have the motivation to carry out two additional rate hikes this year in light of the decline in U.S. inflation.
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Although it is widely anticipated that the Fed will increase rates by 25 basis points later this month, markets are wagering that the increase will signal the end of the Fed’s current cycle of rate increases and that rates will stay at 5.5% until the following year.
considering that higher rates increase the opportunity cost of keeping non-yielding assets, such a situation is positive for gold prices. However, considering that U.S. rates are at their highest level in more than 15 years, future gains in the yellow metal are also likely to be constrained.
Fed policymakers also cautioned that the central bank will look for more definite indicators that inflation has declined. Governor Christopher Waller claimed that the Fed has capacity to raise interest rates as long as the labour market and economy are strong.
However, Fed Fund future prices indicate that markets are pricing in a higher likelihood of a 5.5% peak in US interest rates this year.
The red metal’s imports to China decreased in June, according to data, and this led to a decline in copper prices among industrial metals on Friday.
The world’s biggest importer of copper is currently experiencing a slow economic recovery, which dealers worry may reduce demand for copper on a worldwide scale.
Futures on copper decreased 0.4% to $3.9385 a pound. They had profited from a weaker dollar, but they were still trading up more than 4% for the week.
The focus is now on Chinese GDP numbers, which are due next week and will help determine how strong the economy was in the second quarter.
Additionally, markets are watching for additional stimulus programmes in the second-largest economy in the world.
