Gold prices surged in Asian trade on Thursday, reaching an impressive over two-month high, driven by the release of disappointing UK inflation data. The data fueled speculations that global interest rates might soon peak, and this sentiment was further bolstered by some dollar weakness.
The precious metal came tantalizingly close, just $15 away, from the coveted $2,000 an ounce level.
On Wednesday, UK consumer inflation data fell short of estimates, leading many to bet that the Bank of England was on the verge of concluding its rate hike cycle. This trend followed a similar decline in U.S. inflation data from the previous week, which strengthened speculations that the Federal Reserve was also nearing its peak interest rates for the year.
At 00:28 ET (04:28 GMT), spot gold increased by 0.4%, trading at $1,984.68 per ounce, while gold futures rose by the same percentage, reaching $1,987.25 per ounce.
The upcoming Fed meeting was the center of attention in metal markets, with widespread expectations of a 25 basis points rate hike. However, market participants were particularly attentive to any signals regarding future rate increases.
Softer-than-expected U.S. inflation readings had raised hopes of a potential pause in the current rate hike cycle by the Fed, which had adversely affected the dollar in recent weeks and benefited metal markets, especially gold, as the outlook for interest rates weakened.
In recent times, rising interest rates had diminished the appeal of gold as an investment due to increased opportunity costs of holding non-yielding assets. However, the possibility of more stable rates could attract more flows into the yellow metal.
Moreover, escalating demand for safe-haven assets amid worsening global economic conditions could further drive flows into gold in the coming months.
On a positive note, copper prices also experienced a rebound on Thursday, breaking a four-day streak of losses, as the dollar’s weakness offered support to the red metal.
Copper futures recorded a 0.5% increase, trading at $3.8332 per pound.
Earlier, weak economic data from China, the world’s largest copper importer, had caused significant losses in the red metal. Now, market participants eagerly awaited more stimulus measures from the Chinese government to stimulate growth.
Chinese officials expressed their commitment to implement additional supportive policies in the following months, especially after data showed that the country’s economy barely grew in the second quarter.
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