Gold Prices Rise Slightly in Asian Trade
Gold prices experienced a slight increase during Asian trading on Wednesday, maintaining proximity to recent record highs as traders anticipated potential cuts to interest rates by the Federal Reserve.
Bullion values briefly reached record levels this week amid expectations for a 50 basis point reduction, which negatively impacted the dollar and Treasury yields. However, stronger-than-expected U.S. economic data complicated the outlook for significant rate cuts.
- Spot gold rose 0.2% to $2,574.15 per ounce.
- Gold futures increased 0.3% to $2,600.40 per ounce by 00:16 ET (04:16 GMT).
Gold Near Record Highs with Rate Cuts in Focus
Spot gold prices hovered just below the record high of $2,589.78 per ounce achieved earlier this week. The primary support for gold prices stemmed from a growing consensus that the Fed would reduce interest rates following a meeting later on Wednesday.
As markets grappled with the possibility of a 25 or 50 bps rate cut, the CME Fedwatch indicated expectations increasingly favored a 50 bps reduction.
Despite recent retail sales and inflation data appearing stronger than anticipated—showing resilience in the U.S. economy—concerns regarding a weakening labor market could prompt the Fed to initiate a cycle of easing that may lower interest rates by at least 100 bps by the end of 2024.
Lower interest rates are generally favorable for gold and other precious metals, as they reduce the opportunity cost of investing in non-yielding assets.
Meanwhile, other precious metals lagged behind gold:
– Platinum futures dropped 0.5% to $983.90 per ounce,
– Silver futures fell 0.5% to $30.837 per ounce.
Copper Slides as China Markets Reopen
In industrial metals, copper prices declined on Wednesday as China's markets reopened after a lengthy weekend, with local traders responding to weaker economic data from the country.
- Benchmark copper futures on the London Metal Exchange saw a decline of 0.6%, settling at $9,326.50 per ton,
- One-month copper futures fell 0.9% to $4.2475 per pound.
Weaker industrial production and retail sales data from China, released over the weekend, indicated sustained weakness in key sectors of the economy, raising concerns about a decrease in copper demand. However, these weak indicators also led to speculation that Beijing might implement additional stimulus measures, potentially improving short-term growth and bolstering copper demand, which helped cushion overall losses in the metal.
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