Gold Prices Soar Near Record Highs Amid Dollar Weakness and Trade Tensions

Gold prices surged in Asian trade on Thursday, maintaining their proximity to record highs as a weakened dollar and growing expectations of U.S. interest rate cuts bolstered the precious metal. Spot gold climbed 0.3% to $2,466.18 an ounce, while gold futures expiring in August rose 0.4% to $2,469.55 an ounce, with spot prices hitting a peak of $2,483.78 an ounce.

The surge in gold prices was fueled by a combination of factors, including soft U.S. inflation data and dovish comments from the Federal Reserve that heightened speculation of an impending interest rate cut. Traders were pricing in a 94% likelihood of a 25 basis point rate cut in September, with a slight chance of a 50 basis point cut, according to CME Fedwatch. The resulting decline in the dollar, which hit a near four-month low, further supported commodities priced in the greenback.

Moreover, gold experienced increased safe haven demand following reports suggesting escalating trade tensions between the U.S. and China. A Bloomberg article indicated that the U.S. was contemplating stricter trade restrictions on China, particularly targeting the country’s technology and chipmaking sectors. This potential move could reignite trade tensions between the two economic powerhouses. Comments from U.S. Republican presidential candidate Donald Trump, advocating for Taiwan to pay for U.S. defense supplies, added to concerns over U.S.-China relations.

The positive momentum in gold also lifted other precious metals, with platinum futures rising 0.2% to $1,011.75 an ounce and silver futures jumping 0.7% to $30.573 an ounce.

On the other hand, copper prices dipped amid growing apprehension towards China, the world’s largest copper importer. The red metal’s outlook was clouded by deteriorating sentiment towards China, which could impact copper demand. Benchmark copper futures on the London Metal Exchange fell 0.2% to $9,613.50 a tonne, while one-month copper futures dropped 0.4% to $4.3985 a pound.

Concerns over a potential trade war with China were compounded by weak economic data from the country, as recent Gross Domestic Product (GDP) figures revealed lower-than-expected growth in the second quarter. All eyes are now on the Third Plenum of the Chinese Communist Party, with mounting pressure on Beijing to implement additional stimulus measures.

In conclusion, the surge in gold prices was driven by a combination of factors, including expectations of U.S. interest rate cuts, a weakened dollar, and escalating trade tensions between the U.S. and China. The safe haven appeal of gold, coupled with uncertainties surrounding global trade dynamics, contributed to the metal’s strong performance. Meanwhile, copper prices faced downward pressure amid concerns over China’s economic outlook and trade relations. Investors will closely monitor developments in these markets for further insights into the broader economic landscape.