Gold Prices Dip Below $2,300, Copper Weakens Due to China Concerns

Gold prices experienced a decline during Asian trading on Thursday, falling below significant thresholds as traders leaned towards the dollar and exhibited caution regarding metal investments ahead of critical inflation data that could influence interest rates.

In the realm of industrial metals, copper prices struggled this week due to deteriorating sentiments towards China, the leading importer. Copper was priced at $2,298.86 an ounce, while contracts expiring in August saw a slight drop of 0.2%, settling at $2,309.35 an ounce.

The rise of the dollar to a nearly two-month high this week placed additional pressure on metal prices. This influx into the dollar was primarily driven by expectations surrounding important inflation data set to be released on Friday. This data is the Federal Reserve’s preferred inflation metric and is anticipated to play a significant role in shaping the central bank’s approach to interest rates.

Expectations indicate that the impending data will reveal a modest cooling of inflation in May, although levels are still projected to exceed the Fed’s 2% annual target. Persistent inflation provides the Fed with ample justification to maintain elevated interest rates for an extended period, which tends to have negative implications for gold and other precious metals. Furthermore, hawkish remarks from Federal Reserve officials in recent sessions have contributed to beliefs regarding prolonged high interest rates.

In this financial environment, higher rates increase the opportunity cost associated with non-yielding investments like gold, prompting traders to shift their focus more towards the dollar and U.S. debt. On Thursday, other precious metals followed suit with declines; one metal dropped 0.4% to $1,025.10 an ounce, while another fell by 0.5% to $29.117 an ounce.

Meanwhile, copper remained weak as underwhelming data from China exacerbated concerns. On the London Metal Exchange, benchmark copper rose 0.4% to $9,573.0 per tonne, while one-month copper contracts saw a slight decrease of 0.1%, settling at $3.3665 per pound. Both contracts have been suffering from substantial losses this week amid growing concerns related to China’s economic situation, particularly due to an ongoing trade dispute with the European Union concerning tariffs on Chinese electric vehicle imports. Recent data indicated that economic growth in China stalled in May, heightening worries about a slowdown in the world’s largest copper importer.