Gold Prices Remain Below Key Support Levels Amid Rate Woes
Bullion Prices Remain Unchanged in Asian Trade
Gold prices remained stagnant in Asian trade on Thursday, staying below crucial support levels as the possibility of higher U.S. interest rates continued to reduce the appeal of the precious metal.
Relief from Mild Losses in the Dollar
Bullion prices found some respite as the dollar experienced mild losses, which steadied after surging to three-month highs earlier this week. The greenback is now anticipated to witness further gains in the near term, as traders began to diminish expectations for early rate cuts by the Federal Reserve.
Warnings of Higher Rates from Fed Officials
A number of Fed officials cautioned that the central bank would maintain higher rates if inflation remains persistent, posing a negative outlook for gold. Higher rates increase the opportunity cost of investing in bullion.
Prices Flat and Close to Testing Support Levels
Gold was flat at $1,992.27 an ounce, while futures expiring in April slightly dropped to $2,003.70 an ounce. Both instruments remained pinned at two-month lows and were near testing support levels around $1,970 and $1,980 an ounce.
Decreased Expectations for Rate Cuts
The market indicated that traders were gradually reducing expectations for rate cuts in May and June, amidst growing uncertainty about when the Fed would commence trimming interest rates.
Uncertainty Surrounding Timing and Scale of Rate Cuts
While the central bank has signaled an eventual rate cut this year, it has provided minimal cues on the potential timing and scale of the cuts. The Fed has so far indicated a mostly data-driven approach to rates, and recent data has provided little indication that rate cuts would occur early.
Focus on U.S. Economic Data
Upcoming U.S. economic data is now in focus for more cues on the world’s largest economy. Inflation data for January, due on Friday, is also expected to provide more cues on the path of inflation.
Expectations from Fed Officials
Several more Fed officials are set to speak in the coming days, offering additional cues on monetary policy.
Impact of U.S. Interest Rates on Gold
A sharp rise in U.S. interest rates has limited significant gains in gold over the past two years, even as deteriorating economic conditions across the rest of the globe spurred some demand for safe havens. This trend is expected to continue in the near term.
Outlook for Copper Prices
Among industrial metals, copper prices remained largely unchanged on Thursday and were poised for a subdued weekly performance, as a series of weak economic readings from around the world clouded the outlook for the red metal.
Relief from Three-Month Dollar Peaks
Copper futures expiring in March rose 0.1% to $3.7067 a pound, finding some relief as the dollar retreated from three-month peaks.
Concerns Over Weaker Demand for Copper
However, weak GDP readings from China and the Eurozone kept concerns about slowing economic growth largely in play, as traders feared the prospect of weaker demand for copper this year.
