Gold prices experienced a decline in Asian trading on Tuesday, remaining well below recent peaks as concerns about prolonged higher U.S. interest rates intensified ahead of an upcoming Federal Reserve meeting.
The decrease in gold prices was influenced by diminishing safe-haven demand, particularly with reports indicating renewed ceasefire talks between Israel and Hamas, which further exposed gold to risks associated with interest rate movements.
Spot gold fell by 0.4% to $2,326.45 per ounce, while gold futures expiring in June dropped by 0.9% to $2,337.30 per ounce as of 00:44 ET (04:44 GMT). Despite recent declines, spot prices were trading over $100 below the record high reached earlier in April.
Although gold prices have retreated, they still posted a gain of more than 4% for the month of April, building on the significant increases seen in March.
Investor attention is now focused on the upcoming Federal Reserve meeting, where the central bank is widely expected to maintain current interest rates. However, Federal Reserve Chair Jerome Powell is anticipated to provide a more hawkish outlook on interest rates, especially following persistent signs of inflation surpassing expectations.
The likelihood of sustained inflation has led traders to scale back expectations of imminent interest rate cuts by the Federal Reserve. Now, the central bank is anticipated to consider rate cuts in September or the fourth quarter of this year, if at all.
The prospect of higher interest rates for a longer period is unfavorable for gold, as it increases the opportunity cost of holding the precious metal. Additionally, strength in the U.S. dollar, driven by expectations of steady interest rates, has exerted downward pressure on broader metal markets.
In tandem with gold, other precious metals also experienced declines on Tuesday. Platinum futures dropped by 0.1% to $959.05 per ounce, while silver futures slid by 1.8% to $27.168 per ounce.
Among industrial metals, copper prices maintained around two-year highs on Tuesday, with three-month copper futures on the London Metal Exchange stabilizing around $10,185.0 per ton. However, one-month copper futures fell by 0.1% to $4.6738 per pound.
Official Purchasing Managers’ Index (PMI) data from China indicated a slight slowdown in manufacturing activity in April compared to March, while non-manufacturing activity experienced a more significant decline than anticipated.
Despite a stronger showing in the private sector survey of manufacturing, Tuesday’s data underscored ongoing economic challenges in China, despite a robust first quarter. Questions regarding sustained copper demand in the world’s largest importer of the metal have arisen as a result.
Copper prices have demonstrated a robust upward trend throughout March and April, fueled by expectations of tighter supply due to increased sanctions on Russia and production cuts by Chinese refiners. Copper futures posted gains ranging from 14% to 16% for the month of April.
