Gold prices experienced a minor decline in Asian trading on Wednesday, influenced by hawkish-leaning remarks from key Federal Reserve officials, which bolstered the dollar and Treasury yields, thereby exerting pressure on the precious metal. However, despite this dip, gold prices remained within sight of recent peaks, supported by ongoing concerns surrounding potential conflict between Iran and Israel, which continued to sustain safe-haven demand.
Spot gold steadied at $2,382.65 per ounce, while gold futures expiring in June edged down by 0.4% to $3,398.70 per ounce by 00:21 ET (04:21 GMT). Last week, spot gold soared to record highs surpassing $2,400 per ounce amidst escalating tensions following Iran’s strike against Israel.
The recent pullback in gold prices can be attributed partly to comments made by Federal Reserve Chair Jerome Powell, who signaled reluctance towards imminent interest rate cuts due to persistent inflationary pressures. Powell’s remarks, coupled with robust US inflation and retail sales data, boosted the dollar to over five-month highs, consequently impacting broader commodity markets.
Market sentiment has shifted, with traders now pricing in a nearly 80% probability of the Fed maintaining rates unchanged in June, a significant reversal from earlier expectations of a 25 basis point cut, as indicated by the CME Fedwatch tool.
The prospect of higher-for-longer interest rates poses challenges for gold, given its lack of direct yield, potentially limiting further upside in the metal, particularly considering its current overbought status.
In tandem with gold, other precious metals also experienced declines on Wednesday. Platinum futures fell by 0.6% to $965.10 per ounce, while silver futures dipped by 0.5% to $28.223 per ounce.
Industrial metal prices exhibited mixed performance amid the backdrop of dollar strength and expectations of prolonged higher interest rates. While new sanctions on Russian metal exports contributed to a surge in metal prices to 15-month highs last week, the dollar’s resilience and the prospect of subdued demand underpinned some pullback in prices.
Three-month copper futures on the London Metal Exchange remained steady at $9,465.50 per ton, while one-month copper futures rose marginally by 0.1% to $4.2995 per pound. Similarly, aluminum futures maintained stability around $2,559.0 per ton.
Despite the recent fluctuations, positive economic data from China provided some support to metal market sentiment amidst ongoing geopolitical and monetary policy uncertainties.
