Gold Prices Fall Amid Dollar Rebound

Gold prices experienced a decline during Asian trading on Tuesday, primarily influenced by a rebound in the dollar. Despite this, the outlook for lower interest rates and rising safe haven demand kept gold near its recent peaks.

Market Overview

Among industrial metals, copper prices rebounded as expectations of decreased interest rates may boost demand recovery in the coming months, countering weak demand from leading importer China.

• Spot gold fell 0.4% to $2,507.15 an ounce.
• Gold futures expiring in December decreased by 0.5% to $2,542.05 an ounce by 00:54 ET (04:54 GMT).

Gold’s Record Highs in Sight

Spot prices remained close to a record high of approximately $2,532 an ounce reached earlier in August. The demand for gold has been bolstered by rising confidence that the Federal Reserve will start cutting interest rates in September, following a series of dovish cues from the central bank.

Traders appear divided on whether the reduction will be 25 or 50 basis points, as indicated by the CME Fedwatch. The PCE price index data, the Fed’s favored inflation measure, is set to release on Friday, potentially clarifying this aspect.

Lower interest rates are favorable for gold, as they diminish the opportunity cost of investing in non-yielding assets.

Increased geopolitical tensions also enhanced safe haven demand for gold, particularly as ceasefire discussions between Israel and Hamas stalled, ongoing clashes between Ukraine and Russia persisted, and a rising conflict in Libya led to increased oil prices, further unsettling markets.

Other precious metals faced declines on Tuesday due to dollar strength, recovering from 13-month lows:
– Platinum futures fell 0.7% to $961.15 an ounce.
– Silver futures dropped 0.5% to $30.30 an ounce.

Copper Recovery on Rate Cuts, Chinese Hopes

On the London Metal Exchange, benchmark copper futures saw an increase of 0.6% to $9,361.50 an ounce following a holiday on Monday, with one-month copper futures rising 0.3% to $4.2780 an ounce.

This recovery in copper prices signals optimism that deteriorating economic conditions in top importer China may lead to further stimulus from Beijing. Additionally, anticipated rate cuts in the U.S. have lessened recession fears, encouraging prospects for copper demand.