Gold prices saw a modest increase during Asian trading on Tuesday, continuing their lackluster performance as investors remained cautious amid the U.S. Federal Reserve’s hawkish stance and a strong U.S. dollar.
With a shortened trading week ahead due to the Christmas holiday, traders were reluctant to make significant moves, contributing to the subdued market activity.
As of 21:46 ET (02:46 GMT), spot gold rose by 0.2% to $2,617.22 per ounce, while February gold futures gained 0.1%, reaching $2,631.89 per ounce. On Monday, gold had seen a 0.3% increase after a more than 1% decline the previous week, signaling ongoing uncertainty about the precious metal’s prospects.
Bullion Under Pressure from Fed’s Rate Outlook
Gold prices had dropped to a one-month low on Wednesday, following a U.S. Federal Reserve meeting that indicated interest rates would remain elevated for an extended period. This hawkish outlook has left gold struggling to recover, with prices moving in a narrow range as investors assess the potential impact of higher rates on the market.
Rising interest rates typically pressure gold prices, as the opportunity cost of holding non-yielding gold increases, making interest-bearing assets like bonds more attractive.
Market participants are now expecting only two quarter-point rate cuts in 2025, down from previous expectations of four, due to the ongoing resilience of the economy and persistently high inflation.
Stronger Dollar Adds Downward Pressure on Gold and Other Metals
The Fed‘s more hawkish tone has bolstered the U.S. dollar, as higher interest rates attract more capital to dollar-denominated assets. A stronger dollar generally weighs on gold prices by making the metal more expensive for buyers using other currencies.
Other precious metals followed a similar pattern, with platinum futures inching up 0.1% to $951.90 per ounce and silver futures rising 0.2% to $30.062 per ounce.
Copper Prices Muted Amid Strong Dollar and Seasonal Slowdown
In the industrial metals market, copper prices remained largely unchanged on Tuesday, constrained by the strength of the dollar. Analysts noted that seasonal factors, including slower industrial production and construction activity in anticipation of year-end closures and holidays, were also contributing to the subdued performance of copper.
Benchmark copper futures on the London Metal Exchange were steady at $8,940.50 per ton, while one-month copper futures held firm at $4.0905 per pound.
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