Gold Prices Dip in Asian Trade on Easing Recession Fears, But Rate Cut Expectations Keep Metal Near Record Highs
Gold prices slipped slightly in Asian trade on Friday as concerns of a recession eased, leading to a decrease in safe haven demand. However, expectations of interest rate cuts kept the yellow metal close to record highs.
Spot gold fell 0.1% to $2,453.02 an ounce, while gold futures expiring in December also dropped 0.1% to $2,490.15 an ounce by 01:08 ET (05:08 GMT).
Spot prices were up 0.9% for the week and were only $30 away from reaching a record high. Soft inflation data released earlier in the week fueled expectations of a September interest rate cut by the Federal Reserve, although traders were leaning towards a 25 basis point cut rather than a 50 bps cut.
Despite stronger-than-expected economic data, the possibility of lower interest rates supports gold as it reduces the opportunity cost of investing in non-yielding assets. Additionally, ongoing concerns about potential conflict in the Middle East between Iran and Israel continue to drive safe haven demand for gold.
In the industrial metals sector, copper prices saw a slight dip on Friday but were on track for their first weekly gain in six weeks due to a strike at the world’s largest copper mine in Chile. Benchmark copper on the London Metal Exchange fell 0.2% to $9,128.0 a ton, while one-month copper futures dropped 0.1% to $4.1368 a pound. Both contracts were up about 3% for the week, breaking a five-week losing streak.
The strike at Chile’s Escondida mine, which contributes 5% of global copper supplies, has tightened the outlook for copper supplies, potentially supporting prices. However, concerns about sluggish demand for copper, particularly in China, have limited bigger gains in the metal.
In summary, while gold prices may have dipped slightly due to reduced recession fears, ongoing expectations of interest rate cuts and geopolitical tensions are likely to keep the metal near record highs. On the other hand, copper prices have shown some resilience with a weekly gain despite concerns about weak demand, thanks to supply disruptions at the Escondida mine. Investors should keep a close watch on these factors to make informed decisions about their portfolios.