Gold dips after post-CPI rally, copper hit by weak China GDP

Investing.com -- Gold prices retreated from one-month highs on Monday, as traders locked in some profits after two weeks of gains, while copper prices fell tracking weak economic growth data from major importer China.

Metal prices saw strong gains over the past two weeks as the dollar slumped to 15-month lows, tracking a string of weak U.S. inflation readings. The weak data also spurred increasing bets that the Federal Reserve was close to ending its rate hike cycle for the year.

But gains in gold were also somewhat limited by signs of resilience in the U.S. economy, which in turn weighed on safe haven demand for the yellow metal. Prices have largely stalled after reaching the $1,960 an-ounce level last week.

Spot gold fell 0.2% to $1,951.51 an ounce, while gold futures fell 0.5% to $1,955.45 an ounce by 22:33 ET (02:33 GMT). The two instruments surged 1.6% over the past week.

Copper stalls as China Q2 GDP underwhelms

Among industrial metals, copper prices reversed some recent gains after data showed that economic growth in China, the world's largest copper importer, slowed substantially in the second quarter.

Copper futures slid 0.7% to $3.9068 a pound, after rallying nearly 4% in the past week.

China's second-quarter gross domestic product (GDP) barely grew from the first quarter, while also growing less than expected from the same period last year, government data showed on Monday.

The country’s real estate sector - which is a key source of copper demand - is still struggling with weak sales and laggard activity, while manufacturing activity remained in contraction over the past three months. This spurred concerns over copper demand remaining steady this year, amid slowing growth in China.

Among other readings, Chinese industrial production grew slightly more than expected in June, while retail sales growth slowed substantially.

Still, trade data released last week showed that Chinese copper imports remained robust in June, although this was also attributed in part to manufacturers building inventory on weak spot copper prices.

Metal markets keep Fed meeting in sight

The Federal Reserve is widely expected to hike interest rates during a late-July meeting. But markets are now anticipating an extended pause in the Fed’s rate hike cycle, given the soft inflation readings from last week.

Still, with core U.S. inflation remaining high, markets remained unsure over whether the central bank will signal a pause. Fed officials have also offered mixed cues on future rate hikes.

The prospect of rising interest rates bodes poorly for metal markets, given that it increases the opportunity cost of holding non-yielding assets. But recent declines in the dollar have greatly benefited metal prices.