Gold prices surged to unprecedented levels in Asian trading on Tuesday, bolstered by ongoing optimism regarding potential interest rate cuts by the U.S. Federal Reserve. Market attention is now shifting towards upcoming economic indicators that could further influence prices this week.
In related markets, copper prices experienced a notable increase following the Chinese government’s announcement of a comprehensive set of stimulus measures, which has sparked hopes for an economic recovery in the world’s largest copper importer.
Gold’s rally follows a substantial rate cut from the Federal Reserve last week, with expectations of additional cuts providing further upside for the precious metal. Mixed Purchasing Managers’ Index (PMI) readings from several major economies have also heightened demand for gold, alongside escalating tensions in the Middle East.
As of the latest trading, spot gold rose 0.3% to $2,638.31 per ounce, while December gold futures climbed 0.3% to reach $2,660.80 per ounce.
Fed Cues and Economic Data Driving Gold’s Momentum
The yellow metal’s ascent is largely attributed to the anticipation of lower interest rates, with several Federal Reserve officials expressing support for last week’s 50-basis-point cut. However, they also indicated that the pace of future cuts may decelerate. Analysts at Citi predict at least 125 basis points of cuts by the end of the year. This week will see further commentary from Fed officials, including Chair Jerome Powell on Thursday, which could impact market sentiment.
Additionally, traders are keenly awaiting the release of the Personal Consumption Expenditures (PCE) price index data, the Fed’s preferred inflation measure, scheduled for Friday. The report is expected to reveal inflation levels remaining above the Fed’s target range for August.
Lower interest rates typically favor gold since they diminish the opportunity cost of holding non-yielding assets. Following the Fed’s recent decision, both the dollar and Treasury yields dropped, facilitating further gains in gold.
Other Precious Metals and Copper on the Rise
While gold led the precious metals market, other metals also showed positive movement. Platinum futures increased by 1.1% to $971.20 per ounce, and silver futures also rose by 1.1% to $31.430 per ounce.
In the copper market, benchmark futures on the London Metal Exchange jumped 1.6% to $9,702.50 per ton, with one-month copper futures soaring 2.1% to $4.4380 per pound. The recent stimulus measures from China, including a 50-basis-point cut in bank reserve requirements and reductions in existing mortgage rates, have significantly raised expectations for improved economic growth and increased copper demand.
However, mixed PMI readings from around the globe limited copper’s advance, indicating a decline in manufacturing activity and tempering the overall bullish sentiment in the market.
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