Gold prices declined in Asian trading on Thursday, hovering near recent lows after the Federal Reserve adjusted its forecast for interest rate cuts this year, adding further pressure to the yellow metal.
Despite a decline in the dollar during overnight trading following a softer consumer price index reading, the greenback stabilized on Thursday as markets absorbed a more hawkish stance from the Fed.
Gold and Precious Metals Hit by Fed’s Outlook
Spot gold dropped 0.7% to $2,309.69 per ounce, while gold futures for August delivery decreased by 1.2% to $2,325.60 per ounce by 00:45 ET (04:45 GMT).
Broader metal prices weakened following comments from Fed Chair Jerome Powell, who indicated that the central bank expects to cut interest rates only once this year, down from previous expectations of three cuts. Some policymakers even suggested no rate cuts at all due to persistent inflation. The Fed also raised its inflation forecast for the year.
The prospect of prolonged high-interest rates negatively impacts gold and other precious metals, as it increases the opportunity cost of investing in non-yielding assets. This has resulted in only brief record highs for gold prices over the past year.
Additionally, gold prices were pressured by reports that some major central banks, particularly the People’s Bank of China, had stopped purchasing gold in May. However, Citi analysts remain optimistic, predicting that gold could rise to $3,000 per ounce over the next 12 months.
Other Precious Metals Decline
Other precious metals also experienced declines on Thursday. Platinum futures fell by 1.3% to $951.55 per ounce, while silver futures dropped by 3.3% to $29.262 per ounce.
Copper Prices Weaken on Economic Concerns
Industrial metals recorded losses as well. Copper prices fell due to the bleak outlook for economic activity resulting from the Fed’s interest rate projections.
Concerns about additional stimulus measures in China, the world’s largest copper importer, also weighed on market sentiment, as recent economic data from China indicated a mixed recovery.
Benchmark three-month copper futures on the London Metal Exchange decreased by 1.1% to $9,837.50 per tonne, while one-month copper futures fell by 0.5% to $4.5095 per pound.
