In Asian trade on Tuesday, gold prices dipped below crucial levels as investors shifted their focus to the dollar in anticipation of U.S. inflation data later in the day. This data is expected to play a significant role in determining the trajectory of interest rates.
Over the past two weeks, the precious metal witnessed substantial profit-taking, pushing prices to a three-week low. The outlook for gold was dampened as the likelihood of prolonged higher U.S. rates influenced market sentiment.
As of 00:32 ET (05:32 GMT), spot gold experienced a 0.1% decline, reaching $1,944.71 per ounce, while gold futures expiring in December fell 0.1% to $1,948.25 per ounce.
The pressure on gold prices can be attributed to the strength of the dollar and Treasury yields. Investors are predominantly favoring rate-sensitive assets in anticipation of crucial Consumer Price Index (CPI) inflation data scheduled for release later in the day.
Expectations suggest a moderation in inflation for October, following two months of surpassing forecasts. This reading comes amid warnings from several Federal Reserve officials about persistent inflation, potentially prompting the bank to consider further interest rate hikes.
Gold’s vulnerability to higher-for-longer rates has been evident over the past year, contributing to an uncertain outlook for the precious metal. However, lingering concerns about a global economic slowdown continue to attract some buyers to gold.
Later in the day, data is expected to reveal that the euro zone entered a technical recession in the third quarter. Additionally, the ongoing Israel-Hamas conflict is anticipated to sustain some safe-haven demand for gold, although traders have recently priced in a reduced risk premium on the precious metal.
In the realm of industrial metals, copper prices faced a decline on Tuesday, driven by ongoing pressure from weak Chinese economic data. Copper futures expiring in December fell by 0.3% to $3.6603 per pound.
China, being the world’s largest copper importer, witnessed a significant drop in new loans through October, indicating a decrease in liquidity despite recent government stimulus measures.
Further economic indicators from China, including industrial production, retail sales, and fixed asset investment readings, are expected later in the week. These will provide additional insights into the health of the Chinese economy and may influence commodity markets accordingly.