Gold prices moved little on Tuesday, but they managed to hold onto recent gains as investors looked for additional evidence that U.S. inflation was declining from recent peaks.While gold futures declined 0.2% to $1,736.35 per ounce, spot gold increased by over 0.1% to $1,725.70. As the dollar fell from a 20-year high reached last week, both instruments increased over the previous three sessions. The dollar index lost 0.1% on Tuesday, continuing a five-day losing streak that saw the value of the dollar decline.
The dollar has been under pressure in recent sessions due to a combination of profit-taking and expectations that data will indicate a further reduction in U.S. inflation. Data on the U.S. CPI inflation rate are coming on Tuesday, and it is predicted that the rate decreased from 8.5% in July to 8.1% in August. After a string of interest rate increases by the Federal Reserve, the data will show a second consecutive month of falls from a 40-year peak reached in June and will signal reducing U.S. inflationary pressures on dropping fuel prices.
Inflation given that is still far higher than the Fed’s annual goal rate of 2%, however, investors continue to anticipate the Fed to raise interest rates sharply for the remainder of the year. The probability that the Fed will raise rates by 75 basis points next week, the maximum anticipated increase, is above 90% according to traders. As investors sought greater returns from the dollar and sovereign debt despite rising interest rates, gold has fallen from highs reached earlier this year.
Because of the weaker dollar and anticipated supply interruptions brought on by a strike at Chile’s Escondido mine, copper prices among industrial metals have continued to rise. Copper futures trading in London increased 0.2% to $3.6242 per pound. Monday saw a 1.9% increase. The largest copper mine in the world, Escondido, has unionized workers who decided to strike starting this week. The action is anticipated to reduce the supply of copper around the world, which will raise prices. But China, the red metal’s biggest importer, is also a challenge for copper due to its weak demand.