CPI Worry Lowers Gold, While China Uncertainty Lowers Copper

Gold prices sank to near one-month lows on Monday as traders awaited additional clues on the U.S. economy from critical inflation data due this week, while copper prices suffered sharp losses in the face of increasing concern regarding China's economic recovery.

In the past two weeks, as markets evaluated the prognosis for U.S. monetary policy, a surge in gold prices that began at the beginning of the year has slowed. The Federal Reserve has recently suggested that it intends to continue raising interest rates despite the recent decline in inflation.

It is anticipated that Tuesday's consumer price index (CPI) inflation figure would shed further light on where interest rates could eventually peak. Inflation is anticipated to have declined more in January compared to the previous month, but it continues to trend at rather high levels.

At 19:10 EDT, spot gold declined 0.2% to $1,862.42 per ounce, while gold futures fell 0.1% to $1,872.85 per ounce (00:10 GMT).

Increasing interest rates portend ill for gold and other non-yielding investments. The dollar's strength, which benefits from higher interest rates, also raises the price of gold, reducing demand.

In addition to rising short-term Treasury yields, the yield curve inversion in the United States reached its greatest depth since the 1980s. The trend indicates that the world's largest economy may experience a recession this year.

This scenario may be favorable for gold prices later in 2023, particularly if the Fed halts rate hikes in response to rising economic pressure. Gold was a popular safe-haven investment at the start of the year, as the currency declined and some economists warned of an impending recession.

Additionally, other precious metals fell on Monday. Futures for platinum lost 0.3% to $948.40 per ounce, while futures for silver fell 0.8% to $21.095 per ounce.

Copper prices declined marginally on Monday, following three consecutive weeks of significant falls due to uncertainties around a Chinese economic rebound.

Futures for high-grade copper declined 0.1% to $4.0107 a pound.

Copper prices plunged on Friday with the release of data indicating that Chinese CPI inflation climbed less than anticipated in January, while producer price index inflation weakened further despite the easing of anti-COVID regulations.

The lackluster data indicated that the economic recovery in the world's largest copper importer may take longer than anticipated, especially in light of the rising incidence of COVID-19.