Gold prices dipped slightly in Asian trade on Tuesday as the dollar gained strength, fueled by expectations of smaller interest rate cuts, which weighed on metal prices.
Industrial metals, including copper, also faced pressure due to concerns over China’s economic outlook, with Beijing providing limited signals on potential stimulus measures. Despite positive copper import data, the overall trend remained negative for metal prices.
Gold prices edged down by 0.1% to $2,645.74 per ounce, while futures expiring in December also fell by 0.1% to $2,662.10 per ounce by 23:52 ET (03:52 GMT).
Gold Struggles to Reach New Highs as Dollar Hits 2-Month Peak
The strength of the dollar, which reached a two-month high on Monday, continued to put pressure on gold prices, preventing them from surpassing their September peaks. Comments from Fed officials leaning towards a cautious approach to further rate cuts also boosted the dollar.
Traders are now anticipating a 25 basis point rate cut by the Fed in November, lower than the 50 bps cut in September. This expectation, along with the possibility of a higher terminal rate for the Fed, has negatively impacted gold prices.
Higher interest rates make non-yielding assets like gold less attractive, leading to a decline in prices. Silver also fell by 0.6% to $997.65 per ounce, while platinum dipped slightly to $31.302 per ounce on Tuesday.
Copper Continues to Decline Amid China’s Economic Challenges
Copper prices faced downward pressure, with benchmark prices on the London Metal Exchange falling by 0.2% to $9,633.50 a ton, and December futures dropping by 0.5% to $4.3818 a pound.
China’s uncertain economic stimulus plans contributed to the decline in copper prices, despite an increase in copper imports. The lack of clarity from China’s Ministry of Finance on the scope and timing of fiscal measures disappointed investors.
Overall, China’s economic data fell short of expectations, impacted by a significant drop in GDP growth.
Analysis:
The recent movements in gold and copper prices are largely influenced by the strength of the dollar and expectations regarding future interest rate cuts by the Federal Reserve. As the dollar strengthens, gold faces challenges in reaching new highs, while copper struggles amid uncertainties in China’s stimulus plans. Investors should closely monitor these factors to make informed decisions in the current market environment.