In Asian trading on Thursday, gold prices experienced a decline and approached critical levels, reflecting diminishing safe haven demand and the anticipation of prolonged higher U.S. interest rates, which exerted pressure on the precious metal.
Following a notable retreat from record highs in the previous week, gold prices suffered amid the absence of a significant escalation in potential conflicts between Iran and Israel, reducing the appeal of gold as a safe haven asset.
The vulnerability of gold to headwinds from U.S. interest rates was evident, with higher rates increasing the opportunity cost of investing in bullion. Spot gold edged down by 0.1% to $2,313.62 an ounce, while June gold futures dropped by 0.6% to $2,325.05 an ounce by 00:26 ET (04:26 GMT). The strength of the dollar, which hovered near five-month peaks, also contributed to the downward pressure on metal prices.
With spot prices nearing the critical support level of $2,300 per ounce, there is a potential for further near-term losses for gold. However, the direction of gold’s movement is expected to be influenced significantly by upcoming cues related to the U.S. economy and interest rates.
The release of first-quarter U.S. gross domestic product (GDP) data later on Thursday will provide insights into the resilience of the world’s largest economy at the start of 2024. Moreover, the Personal Consumption Expenditure (PCE) price index data, the Federal Reserve’s preferred inflation gauge, is anticipated to have a substantial impact on gold, as it directly influences the central bank’s outlook on interest rates.
Traders have adjusted their expectations for a June rate cut following hotter-than-expected U.S. inflation readings and hawkish signals from the Fed, contributing to additional near-term pressure on gold prices.
In addition to gold, other precious metals also experienced declines on Thursday, following their recent retreat from peaks reached in the past week. Platinum futures fell by 0.3% to $910.30 an ounce, while silver futures dropped by 1% to $27.078 an ounce.
Meanwhile, copper prices extended their decline from recent two-year highs due to weak economic indicators and concerns about high interest rates, which offset optimism about tighter markets. Three-month copper futures on the London Metal Exchange fell by 0.2% to $9,773.0 a ton, while one-month copper futures declined by 0.1% to $4.4510 a pound. Despite stricter western sanctions on Russian metal exports indicating tighter markets, concerns over steady demand persisted, particularly after weaker-than-expected U.S. purchasing managers index data for April, which showed the manufacturing sector back in contraction territory.
