Gold prices saw a resurgence on Friday as the U.S. dollar weakened against the yuan, driven by encouraging economic data from China, the world’s leading consumer of bullion. However, persistent concerns about the possibility of further U.S. interest rate hikes kept investors cautious.
Spot gold climbed by 0.4% to reach $1,917.59 per ounce as of 0701 GMT. The previous day had witnessed bullion dropping to nearly $1,900 per ounce, marking its lowest point since August 23. Meanwhile, U.S. gold futures recorded a 0.3% gain, reaching $1,938.90.
The boost in the yuan, with two-week highs against the U.S. dollar, followed positive economic data from China. This development rendered dollar-denominated gold more appealing to Chinese buyers.
As the market observed these fluctuations, attention turned towards the upcoming Federal Reserve policy meeting scheduled for September 19-20.
Yeap Jun Rong, a market strategist at IG, commented on the prevailing situation, stating, “The outlook for rates to be kept high for longer has been keeping non-yielding gold prices under pressure.” He also noted that given the resilience of the U.S. economy, there seems to be no immediate need for rate cuts, with the timeline for such actions continuously pushed into the middle of the next year.
Data released on Thursday indicated that U.S. producer prices surged, marking the highest increase in over a year. Additionally, retail sales exceeded expectations, boosted by a surge in gasoline prices. These developments have kept expectations alive for further U.S. rate hikes, even after a potential pause in the coming week.
HSBC, in a note, highlighted that “Numerous Fed officials have made it clear the task of combating inflation is not yet over. We, therefore, do not view monetary policy as supportive of gold until well into 2024.”
The article also mentioned that institutional investors have yet to fully embrace gold, as indicated by net long positions on the CME and ETF holdings.
Moreover, the positive Chinese economic data had a ripple effect on other precious metals, putting them on track for weekly gains. Spot silver experienced a notable 2% increase, reaching $23.08 per ounce. Platinum gained 0.5% to reach $910.91, while palladium maintained stability at $1,250.40.
As gold and other precious metals respond to various global economic factors, investors remain vigilant, keeping a close watch on central bank policies and economic data releases.