The uptick in gold prices reflects investor confidence that the Federal Reserve will cut interest rates at its upcoming meeting. Market sentiment was initially leaning towards a smaller, 25 basis point reduction following strong inflation data earlier in the week. However, softer jobless claims data released on Thursday shifted expectations back towards a potential 50 basis point cut. According to CME FedWatch, traders are pricing in a 58% chance for a 25 basis point cut and a 42% chance for a 50 basis point cut.
Analysts anticipate that the Fed‘s September meeting will mark the beginning of an easing cycle, with the central bank expected to cut rates by at least 100 basis points by the end of the year. There are two more Fed meetings scheduled for the remainder of 2024.
Lower interest rates benefit gold and other precious metals by reducing the opportunity cost of holding non-yielding assets. In addition to gold, other precious metals also saw gains, although they lagged behind gold’s performance. Platinum futures rose 0.6% to $989.80 per ounce, while silver futures increased 0.6% to $30.280 per ounce.
Copper Prices Rise on China Stimulus Hopes
Industrial metals also experienced upward momentum, buoyed by the prospect of lower interest rates, which are expected to stimulate economic activity. Copper prices were further supported by speculation of additional stimulus measures from China, the world’s top copper importer.
Benchmark copper futures on the London Metal Exchange rose 0.7% to $9,280 per ton, while one-month copper futures increased 0.4% to $4.2260 per pound. Weak economic readings from China have led to increased expectations of stimulus measures to support growth. Citi analysts predict “incremental” stimulus measures from Beijing through the remainder of the year.
