Gold Prices Hit Record Highs Amid Fed Rate Cut Optimism

Gold prices reached record highs during Asian trade on Tuesday, continuing a recent surge thanks to persistent optimism regarding U.S. interest rate cuts. Market focus is now shifting to upcoming economic cues this week.

Copper Prices Surge on Chinese Stimulus

Copper prices also enjoyed significant gains after the Chinese government announced a series of stimulus measures, raising expectations for economic recovery in the world’s leading copper importer.

Gold surged to all-time highs following a substantial rate cut by the Federal Reserve last week. The anticipation of further rate reductions has increased the upward potential for gold prices.

Mixed Purchasing Manager Index (PMI) readings from major economies further enhanced gold’s demand, alongside ongoing tensions in the Middle East.

Spot gold increased by 0.3% to $2,638.31 per ounce, with December gold futures also rising by 0.3% to hit $2,660.80 per ounce.

Focus on More Federal Reserve Cues

Gold remains buoyant due to expectations of lower interest rates, with additional signals from the Federal Reserve expected soon.

Several Fed officials expressed support for the recent 50 basis point cut, although they anticipate a slower pace for future reductions. Analysts from Citi predict at least 125 basis points of cuts by year-end.

Upcoming speeches from more Fed officials, particularly Chair Jerome Powell on Thursday, are highly anticipated. Attention is also directed towards the PCE price index data due on Friday, which is expected to report inflation above the Fed’s target.

Lower interest rates are favorable for gold investment, as they decrease the opportunity cost associated with non-yielding assets. Following the Fed’s announcement, both the dollar and Treasury yields dropped, facilitating further gold gains.

Other precious metals experienced increases on Tuesday, albeit lagging behind gold’s performance. Platinum futures rose by 1.1% to $971.20 per ounce, while silver futures also rose by 1.1% to $31.430 per ounce.

Copper Prices Rally Following Stimulus Efforts

Benchmark copper futures on the London Metal Exchange advanced by 1.6% to $9,702.50 a ton, with one-month copper futures surging 2.1% to $4.4380 a pound.

China’s recent stimulus measures include a 50 basis point cut in bank reserve requirements and rate reductions for existing mortgages. These actions have heightened hopes for improved economic growth in the world’s largest copper importer, thus increasing demand for copper.

However, mixed PMI readings worldwide limited copper’s rise, indicating a decline in manufacturing activity.