Asian Markets Update:
Gold prices declined in Asian trading on Thursday, hovering near recent lows as the Federal Reserve revised its outlook for interest rate cuts, posing challenges for the precious metal.
Despite a decline in the dollar during overnight trading due to a softer consumer price index reading, the greenback stabilized on Thursday as markets absorbed the Fed’s more hawkish stance.
Spot gold dropped 0.7% to $2,309.69 per ounce, while gold futures for August delivery fell 1.2% to $2,325.60 per ounce by 00:45 ET (04:45 GMT).
Impact of Fed’s Outlook on Precious Metals:
Broader metal prices weakened after Federal Reserve Chair Jerome Powell announced that the central bank now expects to cut interest rates only once this year, down from earlier projections of three cuts. Some policymakers are even advocating for no rate cuts amid persistent inflation. The Fed also raised its inflation forecast for the year.
The prospect of prolonged high interest rates negatively affects gold and other precious metals, as it increases the opportunity cost of investing in non-yielding assets. This has kept any record highs in gold prices short-lived over the past year.
Gold was further pressured by indications that major central banks, particularly the People’s Bank of China, halted gold purchases in May.
Nonetheless, Citi analysts recently noted that gold could reach as high as $3,000 per ounce over the next 12 months.
Other Precious Metals:
Other precious metals also saw declines on Thursday. Platinum futures fell 1.3% to $951.55 per ounce, while silver futures dropped 3.3% to $29.262 per ounce.
Industrial Metals Hit by Economic Concerns:
Industrial metals, including copper, also recorded losses. Copper prices fell amid concerns that sustained high interest rates could dampen economic activity. Additionally, uncertainty over further stimulus measures in China, the top importer, weighed on copper prices as recent economic data suggested a mixed recovery in China’s economy.
Benchmark three-month copper futures on the London Metal Exchange declined 1.1% to $9,837.50 per tonne, while one-month copper futures fell 0.5% to $4.5095 per pound.
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