Gold prices exhibited limited movement during Asian trade on Tuesday as investors eagerly awaited further indications regarding U.S. monetary policy and inflation in the upcoming week. Concurrently, copper experienced a slight uptick due to optimistic sentiments surrounding increased government spending in China, a major importer of the metal.
Maintaining its support level at $1,900 per ounce, the yellow metal benefited from the weaker-than-anticipated nonfarm payrolls report, which exerted downward pressure on the dollar and fostered hopes that the Federal Reserve would soon conclude its rate hike cycle.
However, Federal Reserve officials emphasized the necessity of near-term rate hikes to counteract mounting inflationary pressures. Market expectations point towards a minimum 25 basis point increase by the Fed later this month.
As interest rates rise, metal prices tend to be adversely affected as they elevate the opportunity cost associated with holding non-yielding assets. This dynamic persisted throughout 2022, constraining gold prices within a narrow range for much of 2023.
At 20:09 ET (00:09 GMT), spot gold remained steady at $1,925.14 per ounce, while gold futures remained unchanged at $1,930.55 per ounce.
CPI Data and Fed Speeches Awaited
Metal traders are closely monitoring key U.S. consumer price index (CPI) inflation data scheduled for release on Wednesday. This data will provide insights into the extent to which inflationary pressures have eased throughout June.
While overall inflation is expected to have moderated, core CPI inflation is projected to remain high, potentially prompting a more hawkish tone from the Federal Reserve.
Throughout the week, several members of the Fed, including Neel Kashkari and Loretta Mester, are scheduled to deliver speeches. Thus far, these central bank officials have echoed the stance of Fed Chair Jerome Powell, emphasizing the necessity of further rate hikes to curb persistent inflationary trends.
Powell previously indicated that at least two more rate hikes are on the horizon for this year, placing additional pressure on metal markets. Nonetheless, the anticipated rise in interest rates may also hamper economic growth, potentially fueling demand for gold as a safe haven asset.
Copper Benefits from Prospects of Chinese Stimulus
Among industrial metals, copper prices edged up on Tuesday, driven by weak economic indicators from China that prompted expectations of increased government stimulus measures in the world’s largest copper importer.
Copper futures experienced a 0.2% increase, reaching $3.7952 per pound.
Monday’s data revealed that China was on the verge of consumer deflation, indicating deteriorating economic conditions in the country. However, this also intensified expectations that the Chinese government would introduce additional emergency spending initiatives to bolster growth.
On Monday, the People’s Bank of China extended financial support for the struggling real estate sector until the end of 2024, aiming to fortify one of the nation’s primary economic engines.
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