Background on Key Figures and Relevance
The recent fluctuations in gold prices have caught the attention of investors and market observers. Gold, a precious metal often considered a safe haven during economic uncertainty, experienced a slight increase on Friday but faced a weekly decline due to inflation data from the United States. This development has reduced expectations for significant interest rate cuts by the Federal Reserve (Fed).
Who are Donald Trump and Vladimir Putin?
Donald Trump is the current President of the United States, while Vladimir Putin serves as the President of Russia. Their upcoming meeting in Alaska has become a focal point for market speculation, as it may influence geopolitical dynamics and, consequently, investor sentiment.
Key Market Developments
- Gold Performance: Spot gold rose by 0.2% to $1,342.62 per ounce but fell by 1.7% during the week. Meanwhile, December gold futures in the U.S. advanced 0.2% to $1,388.2 but dropped by 1.87% during the week.
- Dollar Depreciation: A weaker U.S. dollar made commodities more affordable for buyers using other currencies.
- U.S. Producer Price Index: The report revealed a 3-year high increase in producer prices in July, indicating potential inflationary pressures due to rising costs of goods and services.
- Fed Interest Rate Cuts Expectation: Market operators now anticipate a 90.6% probability of a 25-basis-point interest rate cut by the Fed in September, down from 95% prior to the data release.
Why Gold Performs Well in Low-Interest Rate Environments
Gold does not offer interest or dividends, making it an attractive investment when interest rates are low. In such scenarios, investors often turn to gold as a safe-haven asset.
Impact of Trump-Putin Talks on Gold Prices
Lukman Otunuga’s Analysis: Lukman Otunuga, Senior Research Analyst at FXTM, stated that although gold prices stabilized on Friday, further losses might be imminent depending on the outcome of the Trump-Putin summit in Alaska.
Performance of Other Precious Metals
- Silver: Spot silver decreased by 0.1% to $17.96 per ounce.
- Platinum: Platinum fell by 1.4% to $1,338.32.
- Palladium: Palladium dropped by 2% to $1,122.92.
Copper Market Stabilizes Amidst China’s Economic Concerns
Copper prices stabilized on Friday, as weak Chinese economic data was counterbalanced by the dollar’s weakness and hopes for policy stimulus from Beijing.
China’s Economic Indicators
- Factory Growth: China’s factory output growth plummeted to its lowest level in eight months in July.
- Retail Sales: Retail sales growth slowed sharply in July.
Market Expectations for Chinese Policy Stimulus
Neil Welsh, Head of Metals at Britannia Global Markets, suggested that these indicators imply a moderate demand environment, which may weigh on metal consumption and prices amid concerns about China’s economic slowdown.
Dollar Weakness and Fed Interest Rate Cuts
The week’s data-heavy schedule, coupled with the dollar’s decline, has kept expectations for a Fed interest rate cut in September intact.
