Gold Prices Near Record Highs as Fed Rate Cut Expected
Gold prices dipped slightly in Asian trading on Tuesday, staying close to all-time highs as investors anticipate a significant rate cut from the Federal Reserve. The precious metal reached a record high on Monday and continued to trade near that level as traders priced in a potential 50 basis point rate cut by the Fed on Wednesday. This strength in gold was fueled by weakness in the dollar and Treasury yields.
At 23:56 ET (03:56 GMT), gold futures fell 0.2% to $2,578.03 per ounce, while December futures dropped 0.1% to $2,605.05 per ounce. Spot prices hit a record high of $2,589.69 an ounce on Monday, driven by expectations of a larger rate cut by the Fed.
Traders are currently predicting a 68% chance of a 50 bps rate cut and a 32% chance of a 25 bps cut at the conclusion of the Fed meeting on Wednesday. Lower interest rates are favorable for gold and other precious metals as they reduce the opportunity cost of investing in non-yielding assets. The Fed is likely to signal the beginning of an easing cycle this week, potentially leading to a total rate cut of over 100 bps by the end of the year.
Additionally, gold has been supported by increased central bank buying, particularly in emerging markets. This has contributed to gold outperforming other precious metals. Meanwhile, copper prices edged up slightly on Tuesday, benefiting from a weaker dollar and expectations of lower interest rates. However, concerns about China’s economy have limited gains in copper prices.
In summary, the current market conditions suggest that gold prices are likely to remain elevated as investors await the Fed’s decision on interest rates. Lower rates and central bank buying have bolstered gold’s performance, while copper prices are also seeing some support from the macroeconomic environment. Investors should keep a close eye on the Fed meeting and any further developments in the global economy to make informed decisions about their investments.