Gold Prices Decline in Asian Trade Ahead of Fed Meeting
Gold Extends Losses
In Asian trade on Wednesday, gold prices continued their decline, following significant overnight losses. The yellow metal slipped past a key support level as markets anticipated potentially hawkish signals from the Federal Reserve later in the day.
Factors Contributing to the Decline
Diminished safe haven demand amid some de-escalation in global geopolitical tensions has left gold vulnerable to headwinds from interest rates. This decline marks a further fall from record highs reached in April.
Spot Prices and Futures
Spot gold fell by 0.1% to $2,285.19 per ounce, while gold futures for June dropped by 0.3% to $2,295.25 per ounce by 23:50 ET (03:50 GMT). Tuesday saw spot prices dipping below the closely-watched $2,300 per ounce level, indicating potential for further losses as investors await cues on U.S. interest rates.
Focus on Fed Meeting
Attention is now centered on the conclusion of a two-day Federal Reserve meeting scheduled for later on Wednesday. While the central bank is expected to maintain rates unchanged, Fed Chair Jerome Powell is anticipated to offer a hawkish outlook.
Impact of Inflation Readings
Recent hotter-than-expected inflation readings, including a robust employment cost index for the first quarter, have reinforced expectations of a hawkish stance from the Fed. Traders have consequently revised down expectations of early rate cuts, with September being the projected timeline for potential adjustments.
Effect on Gold Prices
The prospect of higher interest rates poses a challenge for gold, as it increases the opportunity cost of investing in the precious metal. This shift in market sentiment has led to a decline in gold prices from their recent highs over the past few weeks.
Performance of Other Precious Metals
In addition to gold, other precious metals also experienced declines on Wednesday. Platinum futures fell by 0.2% to $943.95 per ounce, while silver futures dropped by 0.2% to $26.598 per ounce. These declines were partly attributed to the strengthening of the dollar to near six-month highs.
Copper Prices React
Meanwhile, copper prices retreated from their two-year highs amid pressure from the stronger dollar and profit-taking following stellar gains in April. Three-month copper futures on the London Metal Exchange fell by 0.8% to $9,910.0 per ton, with one-month copper futures declining by 0.3% to $4.5285 per pound.
Outlook for Copper
Despite the recent surge in copper prices driven by expectations of tighter supplies, concerns about slowing economic growth, especially in the context of prolonged higher interest rates, may impact copper's performance in the near term.
