Gold prices dip as dollar, Treasuries firm before CPI data

Investing.com-- Gold prices fell on Wednesday, coming under pressure from renewed strength in the dollar and yields as markets hunkered down before a key U.S. inflation reading due later in the day. 

Bullion prices hit an over two-week low as  markets positioned for a potentially stronger inflation reading, amid higher fuel prices and strong consumer spending.

The dollar was the safe haven of choice, with Wednesday’s inflation reading also expected to set the tone for a Federal Reserve meeting next week. The greenback hovered below a six-month peak, while benchmark 10-year Treasury yields remained within sight of a more than 20-year high. 

Spot gold fell 0.1% to $1,911.66 an ounce, while gold futures expiring in December fell 0.1% to $1,933.85 an ounce by 00:32 ET (04:32 GMT). 

CPI reading on tap before Fed meeting 

Consumer price index data is expected to show that inflation grew 0.6% in August, accelerating from the monthly pace of 0.2% seen in July. Core inflation growth is also expected to remain steady at 0.2%. 

Any signs of hotter U.S. inflation gives the Fed more impetus to hike interest rates, or even keep them higher for longer. A strong reading could also attract more hawkish rhetoric from the Fed next week, although the bank is widely expected to keep rates on pause for now.

Rising interest rates bode poorly for gold and other metals, given that they increase the opportunity cost of investing in non-yielding assets. This notion had battered gold through the past year, and has limited any major recovery in the yellow metal. 

U.S. rates are expected to remain high until at least mid-2024, limiting the prospect of a recovery in gold, while diminished expectations of a recession this year also indicate weak safe haven demand for the yellow metal.

Still, weakness in other major economies may drive some flows into bullion.

Copper prices slip as China cheer runs dry

Among industrial metals, copper prices fell slightly on Wednesday, reversing some recent gains as a China-driven rally ran out of steam.

Copper futures fell 0.3% to $3.7780 a pound, after losing 0.4% in the prior session.

While recent data showed some improvement in China’s economy, overall sentiment towards the world’s largest copper importer remained largely dim, especially as investors grew frustrated with Beijing’s conservative approach to unlocking more stimulus. 

Focus is now on industrial production and retail sales data for August, due Friday, for more cues on economic activity.