Gold steadies ahead of U.S. inflation data, copper eyes weekly gains

By Ambar Warrick

Investing.com-- Gold and copper prices moved little on Friday as investors hunkered down ahead of key U.S. inflation data due later in the day, while the red metal headed for a second positive week amid optimism over loosening COVID restrictions in China.

Bullion prices were set to close the week a touch lower after paring a majority of earlier losses, as fears of a recession invited some safe haven plays back into the yellow metal. Recent weakness in the dollar also benefited gold prices.

Spot gold hovered around $1,789.43 an ounce, while gold futures steadied at $1,801.25 an ounce by 18:56 ET (23:56 GMT). Both instruments were set to lose about 0.4% this week, having sunk as low as $1,765.86 an ounce.

Focus is now squarely on U.S. producer price index inflation data for November, due later in the day. The reading is expected to have eased further from the prior month, signaling that rising interest rates and tightening monetary conditions are having their intended effect.

But any signs that inflation remained sticky during the month could trigger more losses in markets, given that the Federal Reserve is likely to hike interest rates for longer in such a scenario. Several market participants warned that this could trigger a recession in 2023.

The PPI reading is expected to herald a similar trend in the more closely watched consumer price index, which is set to be released next week.

Rising interest rates were the biggest weight on gold prices this year, dragging the metal off annual highs as the opportunity cost of non-yielding assets rose.

The direction of the Fed’s interest rate hikes in 2023 depends largely on inflation, which is still trending well above the central bank’s target range.

Other precious metals also moved little on Friday. Platinum futures rose 0.1%, while silver futures added 0.2%.

Among industrial metals, copper prices were flat, but were headed for their second consecutive week of gains amid optimism over a Chinese economic reopening.

Copper Futures traded around $3.8818 a pound, and were set to add about 0.8% this week.

Prices of the red metal took positive cues from China announcing the relaxation of several anti-COVID movement restrictions and testing mandates this week. Markets hope that the move will drive a recovery in the world’s largest copper importer.

But given that the country is still struggling with record-high increases in infections, a broader reopening may be further away than expected.