Gold prices rise, keep record highs in sight amid bets on smaller rate cut

Investing.com-- Gold prices rose in Asian trade on Thursday and remained in sight of record highs as traders bet that the yellow metal will still benefit from a lower interest rate environment.

But bets on a bumper interest rate cut by the Federal Reserve diminished greatly after core consumer price index inflation data read higher than expected for August. Traders were seen positioning for a smaller, 25 basis point reduction later in September- a notion that boosted the dollar and limited gold’s advance. 

Spot gold rose 0.2% to $2,516.88 an ounce, while gold futures expiring in December rose 0.1% to $2,544.55 an ounce by 00:36 ET (04:36 GMT). 

Gold stalls below record highs with Fed, PPI inflation on tap 

Spot gold was trading just below a record high of $2,532.05 an ounce, after coming within spitting distance of the level earlier this week. 

The yellow metal benefited from some increased safe haven demand over the past week, especially as fears of a U.S. recession battered risk-driven markets. 

Wednesday’s CPI reading saw traders largely scale back expectations of a 50 bps rate cut when the Fed meets next week, with the central bank now expected to enact a 25 bps reduction, CME Fedwatch showed.

Sticky inflation gives the Fed less impetus to cut interest rates sharply.

Before next week’s meeting, markets will also have to contend with producer price index inflation data, which is due later on Thursday. 

Still, the prospect of lower rates still presents a positive scenario for gold and precious metals, given that it reduces the opportunity cost of investing in non-yielding assets. 

Platinum futures rose 0.4% to $961.85 an ounce, while silver futures rose 0.4% to $29.047 an ounce.

Copper edges higher on some China stimulus hopes 

Among industrial metals, copper prices advanced on Thursday, recouping some recent losses as a slew of weak Chinese economic readings spurred expectations of more stimulus in the world’s biggest copper importer. 

Benchmark copper futures on the London Metal Exchange rose 0.4% to $9,180.0 a ton, while one-month copper futures rose 0.3% to $4.180 a pound. 

A slew of weak economic readings from China battered copper prices over the past week, as traders feared a slowdown in the country will dent its appetite for copper. China’s copper imports also fell for a third consecutive month. 

But this drove hopes of more stimulus measures in the country. Analysts at Citi wrote in a recent note that the government was likely to enact more interest rate cuts and mortgage refinancing measures to shore up slowing growth and local demand.