Investing.com -- Gold and copper prices fell to their weakest levels in a month on Monday, coming under pressure from a stronger dollar as rising U.S. inflation pushed up concerns over higher interest rates.
Data from last week showed that U.S. inflation edged higher in July after declining steadily this year, pushing up concerns that the Federal Reserve will be forced into raising interest rates further to curb price pressures.
This notion pushed up the dollar, with the greenback hitting an over one-month high against a basket of currencies on Monday. Strength in the dollar weighed on most commodities priced in the greenback.
Spot gold fell 0.1% to $1,911.69 an ounce, while gold futures expiring in December fell 0.2% to $1,943.55 an ounce by 20:23 ET (00:23 GMT). Both instruments were at their weakest levels since early-July.
Dollar supported by higher inflation, metals under pressure
Data released on Friday showed that U.S. producer price index (PPI) inflation grew more than expected in July. The reading came just a day after data showed consumer price index inflation also rose in July.
The readings showed that inflation was once again trending higher after easing substantially earlier this year, and drove concerns that the Fed will have to raise rates further.
This notion boosted the dollar, with the prospect of higher rates also pointing to more pressure on non-yielding assets such as metals. Rising interest rates increase the opportunity cost of investing in non-yielding assets, with gold having logged steep losses in the past year as U.S. interest rates grew.
The yellow metal is also set for little relief this year, with U.S. rates set to remain at 22-year highs for at least the remainder of 2023.
Copper sinks as China concerns weigh
Among industrial metals, copper prices fell to an over one-month low on Monday, as concerns over slowing economic growth in major importer China added to pressure on the red metal.
Copper futures fell 0.3% to $3.7077 a pound- their weakest level since late-June.
Weak trade and inflation data from the country for July, coupled with scant details on new stimulus measures from Beijing saw investor sentiment sour substantially towards China. This also weighed on copper prices, given that the country is the world’s largest importer of the red metal.
Focus this week is squarely on industrial production and retail sales data, due on Tuesday. Both readings are expected to show an extended decline in July amid worsening economic conditions in the country.