Gold prices experienced a slight rise in Asian trade on Tuesday, finding stability after a remarkable surge that propelled the yellow metal to record highs earlier in the week. Persistent expectations of a less dovish Federal Reserve and increased safe-haven demand contributed to gold’s ascent.
The yellow metal witnessed an unusually large jump in early trade on Monday, briefly reaching a lifetime high of $2,148.78 per ounce before retracting sharply from the peak. This surge was fueled by a combination of factors, including signals of a somewhat less hawkish stance from the Federal Reserve, raising expectations for early interest rate cuts. Safe-haven demand for gold also increased after an attack on U.S. vessels in the Red Sea raised concerns about broader conflicts in the Middle East. Additionally, an unrelated attack on a gold mine in Peru added to fears of potential supply disruptions in gold markets.
Despite the retracement from its record peaks, gold settled well above the coveted $2,000 per ounce level, indicating potential for further gains. In the current market, spot gold rose 0.2% to $2,032.60 per ounce, while gold futures expiring in February increased by 0.4% to $2,050.35 per ounce by 00:19 ET (05:19 GMT).
As markets awaited key U.S. nonfarm payrolls data scheduled for Friday, there was a reassessment of expectations for early interest rate cuts by the Federal Reserve. Fed Fund futures prices indicated a 49% chance of a rate cut by March 2024, down from the 60% chance at the beginning of the week. The resulting uncertainty contributed to a further rebound of the dollar from recent lows, impacting gold’s recent gains. However, gold is expected to remain well-bid, with markets convinced that the Federal Reserve has concluded its interest rate increases in this cycle.
In the industrial metals sector, copper prices experienced a modest rise on Tuesday, despite mixed cues from major copper importer China. Copper futures expiring in March increased by 0.1% to $3.8303 per pound. A private survey revealed that China’s services sector activity grew more than expected in November, complementing an earlier survey that highlighted unexpected resilience in the manufacturing sector. However, concerns over a new epidemic in China, following a spike in respiratory illnesses, tempered optimism, with reports suggesting the National Health Commission is considering curbs on social gatherings.
