Gold prices experienced a decline in Asian trading on Thursday, retreating from recent record highs as profit-taking and a rebound in the U.S. dollar tempered the yellow metal’s rally. Market attention remains focused on potential U.S. interest rate cuts and growing recession concerns.
The yellow metal had surged to new records earlier this week, driven by increasing expectations that the Federal Reserve would initiate rate cuts in September. However, Thursday’s trading saw spot gold fall by 0.5% to $2,500.55 per ounce, while December gold futures dropped 0.4% to $2,547.05 per ounce. Spot gold had reached a peak of $2,532.05 per ounce on Wednesday.
Despite these declines, the belief in forthcoming rate cuts persists. The Fed’s July meeting minutes revealed broad support among policymakers for reducing interest rates, fueled by progress in controlling inflation. This has solidified expectations for a September rate cut, though opinions remain divided between a 25 or 50 basis point reduction, according to CME FedWatch.
Recent labor market data has heightened recession fears, contributing to the pullback in gold prices. A downward revision in payrolls data for March 2024, released Wednesday, intensified worries about a potential U.S. economic slowdown. This has led to a cautious mood in the financial markets, with gold facing selling pressure amid profit-taking and a recovering dollar, which has bounced back from seven-month lows.
Attention is now shifting to Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday. His comments could provide further clarity on the Fed’s policy trajectory and impact gold prices.
While lower interest rates typically benefit gold by reducing the opportunity cost of holding non-yielding assets, other precious metals also saw modest gains but trailed gold. Platinum futures fell 0.4% to $970.00 per ounce, and silver futures decreased 0.3% to $29.448 per ounce.
In the industrial metals sector, copper prices experienced a pause in their recovery on Thursday amid ongoing concerns over global economic growth. Persistent fears of a slowdown in China, despite a slight improvement in domestic copper demand, weighed on prices. Benchmark copper futures on the London Metal Exchange held steady at $9,262.50 per ton, while one-month copper futures dipped 0.2% to $4.1930 per pound.
