Gold prices remained stable in early trade on Thursday, while copper prices recovered from steep losses. This came after data showed that US inflation had eased slightly in April, but still remained stubbornly high, indicating a potentially hawkish outlook from the Federal Reserve.
The US consumer price index inflation grew at an annual pace slightly slower than expected in April but remained well above the Fed’s annual target range. On a monthly basis, inflation also rose as anticipated, revealing that price pressures still remained elevated in the country.
Gold had a muted response to the data, as investors wagered that US interest rates would continue to stay higher for an extended period. Despite this, the yellow metal was pinned above $2,000, thanks to consistent safe-haven demand as the prospect of an economic slowdown loomed in the US.
Markets have priced in almost a 100% chance that the Fed will not raise interest rates, with Fed Fund futures prices pointing to a pause in June. However, the sticky inflation data caused traders to reduce their expectations of any rate cuts this year.
Spot gold rose 0.1% to $2,032.11 per ounce, while gold futures increased 0.1% to $2,038.40 per ounce by 20:08 ET (00:08 GMT).
Although the outlook of US rates staying higher for longer does not bode well for gold and other non-yielding assets, the yellow metal still stands to benefit from increased safe-haven demand as high rates and relatively high inflation indicate worsening economic conditions this year.
Other precious metals such as platinum and silver futures were also largely steady on Thursday, moving less than 0.1% in either direction.
The dollar sharply declined after the inflation data, as did US Treasury yields. The prospect of an economic slowdown weighed heavily on copper prices, which sank 1.7% after Wednesday’s CPI reading before steadying somewhat.
Copper futures rose 0.1% to $3.8518 per pound, trading just above their weakest level in four months. Signs of sluggish economic growth in China also impacted the red metal this week, as trade data revealed that Chinese imports had declined more than expected in April.
Despite the lifting of anti-COVID measures, commodity demand in the world’s largest copper importer remained weak, with the country’s vast manufacturing sector struggling with slowing demand.
Focus now turns to Chinese inflation data, scheduled for later on Thursday, for more insights into the world’s second-largest economy.
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