Gold prices steady as dollar eases before CPI test; copper strong

Investing.com-- Gold prices steadied in Asian trade on Wednesday, taking advantage of a softer dollar as markets hunkered down before key U.S. consumer inflation data which is likely to factor into the outlook for interest rates. 

Among industrial metals, copper prices rose to over two-year highs, as the prospect of tighter supplies and fiscal stimulus in top importer China helped offset concerns over sluggish demand. 

Gold saw overnight gains after comments from Federal Reserve Chair Jerome Powell suggested that U.S. rates will not rise any further. These comments were also a key factor in the dollar’s decline. 

Spot gold steadied at $2,357.65 an ounce, while gold futures expiring in June rose 0.1% to $2,361.90 an ounce by 00:50 ET (04:50 GMT). 

CPI data awaited after PPI surprises to the upside 

Markets were now focused squarely on consumer price index data for April, especially after producer price index data released overnight surprised to the upside.

The stronger PPI reading ramped up concerns that sticky inflation will deter any potential interest rate cuts this year. A hot CPI reading is likely to further these concerns. 

While Powell’s comments, chiefly that monetary policy remained tight enough, helped soothe market concerns over higher rates, the Fed Chair still warned that the central bank needed much more confidence that inflation was coming down to its 2% annual target. 

Such a scenario means the Fed is likely to keep rates high for longer, which in turn bodes poorly for metal prices. High rates push up the opportunity cost of investing in precious metals.

Other precious metals also advanced on Wednesday, capitalizing on a softer dollar. 

Platinum futures rose slightly to $1,065.85 an ounce, while silver futures rose 0.2% to $28.767 an ounce. 

Copper steadies at over 2-yr highs, more China cues awaited 

Three-month copper futures on the London Metal Exchange rose 0.6% to $10,145.0 a ton, while one-month copper futures steadied at $5.0137 a pound. 

Both contracts were at their highest levels since April 2022, after top importer China said it will begin a massive, 1 trillion yuan ($138 billion) bond issuance this week. The issuance will be directed towards shoring up economic growth. 

Copper prices were sitting on a strong run-up over the past two months, buoyed by the prospect of tighter supplies amid Russian metal sanctions and Chinese refinery cuts.

Focus this week is now on industrial production and retail sales readings from China, due on Friday.