Recent CPI data has once again shaken up the commodities market, with both gold and copper prices experiencing significant drops. As inflation data supports the U.S. dollar’s strength, precious metals like gold have seen declining demand, falling to near two-month lows.
What’s Driving Gold’s Decline?
The October CPI data indicates a smaller inflation increase than expected, bolstering the dollar’s strength against other currencies. This inverse relationship between gold and the dollar means that when the dollar rises, gold becomes more expensive for foreign buyers, reducing demand.
Key factors impacting gold prices:

Strengthening U.S. Dollar: As the dollar strengthens, gold becomes less appealing to international buyers.
Rate Hike Speculation: The CPI data has led to speculation that the Federal Reserve may hold off on rate cuts, keeping interest rates high and diminishing gold’s appeal as a non-yielding asset.

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Copper Faces a Similar Downtrend
Copper prices also took a hit following the CPI data release. As a critical industrial metal, copper prices are often tied to broader economic growth. When inflation concerns lead to stronger currencies, demand for commodities like copper can weaken.
The main drivers behind copper’s slide include:

Slowing Industrial Demand: Economic uncertainties and high interest rates can reduce industrial activity, impacting copper demand.
Dollar Pressure on Commodities: Like gold, copper’s price movement is inversely related to the dollar’s strength.

Looking Forward: What’s Next for Commodities?
As the U.S. dollar remains strong, commodities may continue to experience downward pressure. However, market watchers believe that if the Federal Reserve signals a rate pause or cut, it could shift the dollar’s momentum, potentially driving renewed interest in metals.
Investors in commodities can leverage resources like FMP’s Commodities API to stay informed on price fluctuations and make data-driven decisions.