Gold Prices Remain Flat-to-Lower After Fed Rate Cut
Gold prices stayed within a flat-to-low range during Asian trade on Thursday, as investors digested the less dovish outlook from the Federal Reserve following a 50 basis point rate cut. The strength in the U.S. dollar put pressure on bullion prices, signaling that U.S. interest rates may not decline as much as previously anticipated in the medium to long term. Additionally, profit-taking ensued after gold hit record highs ahead of the Fed’s decision.
Regarding gold futures, the December futures contract fell 0.5% to $2,585.65 an ounce, while spot prices also retreated from recent record levels. Despite the overnight losses, the prospect of lower rates continues to support the allure of non-yielding assets like gold due to decreased opportunity costs.
Fed Rate Cut Impact and Market Outlook
The Federal Reserve implemented a 50 basis point rate cut, aligning with the higher end of market expectations, marking its first cut since the onset of the COVID-19 pandemic. Although markets had anticipated more dovish signals, Fed Chair Jerome Powell iterated a balanced view on the economy, flagging the possibility of additional rate cuts in the future.
Powell’s stance on rates in the medium-to-long term – indicating a higher neutral rate than previously perceived during the pandemic – tempered some of the optimism generated by the rate cut. However, the overall outlook suggests further cuts, with markets pricing in additional decreases by year-end.
Additional Insight on Precious Metals and Copper Prices
In line with the movement in gold prices, other precious metals such as silver and platinum also saw gains on Thursday, albeit still recovering from overnight losses. Silver rose 0.5% to $978.15 an ounce, while platinum gained 0.2% to $30.755 an ounce.
Furthermore, copper prices rose on Thursday, fueled by expectations of more stimulus measures from China, the top importer of the metal. The upcoming interest rate decision from the People’s Bank of China is anticipated to maintain the current benchmark rate. However, ongoing signs of economic fragility in China may eventually lead to further cuts in the Loan Prime Rate (LPR), stimulating demand for industrial metals like copper.
Overall, while the initial impact of the Fed rate cut may have been less dovish than expected, the continued prospect of lower rates and ongoing stimulus measures in key economies like China could provide support for gold and other precious metals in the near term.
