Gold Prices Dip as U.S. Economy Shows Strength, Rate Cut Uncertainty Looms
Gold prices edged lower in Asian trading as concerns over U.S. inflation and a robust economy raised doubts about the extent of potential interest rate cuts by the Federal Reserve.
The recent ceasefire between Israel and Hezbollah also dampened demand for safe-haven assets, contributing to the yellow metal’s losses this week.
However, the decline in gold prices was limited as the dollar weakened from its recent highs, with traders still betting on a rate cut in December.
Gold futures fell 0.2% to $2,630.52 per ounce, while February futures dropped 0.4% to $2,653.91 by 23:00 ET (04:00 GMT).
Strong PCE and GDP Data Raise Doubts About Rate Cuts
The latest data on personal consumption expenditure (PCE), the Fed’s preferred inflation measure, showed an expected increase in October, surpassing the central bank’s 2% target. Additionally, GDP data indicated steady growth in the third quarter, along with slightly better-than-expected weekly jobless claims figures.
While these readings did not deter expectations for a rate cut in December, traders became less certain about future rate movements in 2025.
Uncertainty surrounding the impact of a Donald Trump presidency, including the potential for more inflationary policies and trade tariffs, could limit the Fed’s easing cycle. UBS analysts predict that the central bank will reduce rate cuts to once a quarter in 2025 and anticipate a higher terminal rate.
Higher interest rates are generally unfavorable for non-yielding assets like gold.
Other precious metals also experienced declines, with silver holding steady at $933.40 per ounce and platinum falling 1% to $30.255 per ounce.
Copper Prices Under Pressure, China’s Economic Signals Awaited
Copper prices remained relatively unchanged after recent losses, as market focus shifted to upcoming economic data from China, the largest importer of copper.
Benchmark copper on the London Metal Exchange slipped 0.1% to $9,015.0 per ton, while February futures stabilized at $4.1410 per pound.
The red metal faced downward pressure amid concerns of a potential trade war between the U.S. and China following threats of additional tariffs by President-elect Donald Trump.
Traders are keen to see what measures Beijing will implement to counter economic challenges posed by possible U.S. tariff hikes. Chinese economic data for November is set to be released on Saturday, providing further insights into the country’s economic health.