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HomeGoldGold Prices Approach $2,400 Mark Amid CPI Data, Sparking Rate Cut Speculation
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Gold Prices Approach $2,400 Mark Amid CPI Data, Sparking Rate Cut Speculation

Gold prices stabilized during Asian trading on Thursday following robust gains in the previous session, propelled by soft inflation data that drove the dollar to its lowest point in a month and fueled expectations of forthcoming interest rate cuts.

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The precious metal is now within striking distance of the record highs reached in May, as market participants increasingly wager on the Federal Reserve initiating rate reductions as early as September. The dollar experienced a notable decline on Wednesday due to this speculation, consequently boosting broader metal prices.

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Spot gold saw a marginal increase of 0.1%, reaching $2,388.84 per ounce, while gold futures expiring in June steadied at $2,393.50 per ounce by 23:43 ET (03:43 GMT).

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Gold’s Rally Fueled by Softening CPI Data and Heightened Rate Cut Expectations

Gold prices saw a rebound of over 1% from Wednesday’s levels, spurred by data indicating a slowdown in U.S. consumer price index inflation for April compared to March, alongside a decline in core CPI from the previous month. These figures, coupled with softer-than-anticipated retail sales data, have buoyed hopes of a forthcoming easing in inflation, thereby emboldening the Federal Reserve’s stance on commencing rate adjustments.

According to the CME Fedwatch tool, traders are now pricing in a higher probability of a 25 basis point rate cut in September, with the likelihood standing at nearly 54%.

The allure of gold and other precious metals typically diminishes in environments characterized by high interest rates, as they incur opportunity costs without offering direct yields. Additionally, gold may see heightened demand as a safe haven asset should the U.S. economy experience further cooling throughout the year.

However, despite the prevailing sentiment, several Federal Reserve officials cautioned in the past week that the central bank requires greater assurance regarding the downward trajectory of inflation. Moreover, inflation levels remain comfortably above the Fed’s annual target of 2%.

Other precious metals also experienced gains, with platinum futures rising by 0.5% to $1,081.90 per ounce, and silver futures increasing by 0.2% to $29.797 per ounce.

Copper Prices Surge to Two-Year Highs on Optimism Surrounding China

In the realm of industrial metals, copper prices continued their ascent on Thursday, maintaining levels not seen in over two years amidst sustained optimism regarding increased fiscal stimulus in China and augmented support for the property market.

Three-month copper futures on the London Metal Exchange rose by 1% to $10,375.0 per ton, while one-month copper futures surged by 1.4% to $4.9915 per pound, nearing highs recorded in April 2022.

Beijing’s announcement of a massive 1 trillion yuan ($138 billion) bond issuance this week, coupled with several major cities easing restrictions on home purchases to bolster the property market, further fueled the bullish sentiment.

Market participants now eagerly await Chinese industrial production and retail sales data, scheduled for release on Friday, for additional insights into the stance of the world’s largest copper importer.

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