Gold prices experienced a slight decline in Asian trade on Wednesday, maintaining a trading range established over the past week amid growing uncertainty regarding potential U.S. interest rate cuts this year.
Copper prices also edged lower among industrial metals, retracting from earlier gains driven by increased optimism over China.
The yellow metal, grappling with a tepid start to 2024, had dipped to $2,000 an ounce earlier in the month. Traders began adjusting their expectations, gradually ruling out bets on Federal Reserve interest rate cuts as early as March 2024.
However, gold saw a resurgence in response to safe-haven demand, particularly as geopolitical tensions escalated in the Middle East. This resurgence resulted in gold establishing a trading range between $2,000 and approximately $2,050 an ounce over the past week.
In the latest market movements, spot gold witnessed a 0.3% decline, reaching $2,023.92 an ounce, while gold futures expiring in February experienced a 0.1% drop, closing at $2,024.65 an ounce by 00:17 ET (05:17 GMT).
The strength of the U.S. dollar, trading near six-week highs on Wednesday, further exerted downward pressure on gold prices.
Market focus has shifted to forthcoming U.S. economic data, including fourth-quarter gross domestic product (GDP) figures set to be released on Thursday. Analysts anticipate signs of cooling in U.S. economic growth. Additionally, the Personal Consumption Expenditures (PCE) price index data, the Federal Reserve’s preferred inflation gauge, is expected on Friday, likely reiterating persistent inflation in December.
These releases precede the Federal Reserve’s first meeting of 2024, where the central bank is widely anticipated to maintain current interest rates. Attention will be closely drawn to any indications regarding potential rate cuts.
While gold prices are anticipated to benefit from lower interest rates later in the year, near-term performance may be subdued if the Federal Reserve opts to keep rates elevated for an extended period. Higher interest rates increase the opportunity cost of investing in gold, diminishing its appeal.
Despite this, gold managed to achieve approximately a 10% gain in 2023, buoyed by safe-haven demand during the Israel-Hamas conflict.
Meanwhile, copper prices faced a marginal decrease as copper futures expiring in March dropped 0.2% to $3.7983 a pound. Despite this dip, they were trading up 0.3% for the week.
Reports of planned stimulus measures in China contributed to a sharp rebound in copper prices from a recent two-month low. Optimism regarding an economic recovery in China, the world’s largest copper importer, fueled hopes for improved demand.
However, copper’s start to 2024 was lackluster, with economic readings for December indicating minimal improvement in Chinese economic growth. Concerns about slowing Chinese demand have weighed on copper prices over the past two years.
