Investing.com– Gold prices saw a decline in Asian trade on Wednesday, continuing the sharp losses from the previous day. The drop in prices pushed the yellow metal below a key support level, reflecting market concerns over potential hawkish signals from the Federal Reserve that were expected later in the day.
Gold prices under pressure
The drop in gold prices came after reaching record highs in April, with safe-haven demand diminishing due to a reduction in global geopolitical tensions. Additionally, concerns over rising interest rates posed further challenges for gold prices as they fell below the significant $2,300 an ounce level on Tuesday.
Fed meeting and Powell’s outlook
Market focus shifted towards the Federal Reserve’s two-day meeting set to conclude on Wednesday, where interest rates were expected to remain unchanged. However, Fed Chair Jerome Powell was anticipated to provide a hawkish outlook following recent higher-than-expected inflation data. The stronger inflation readings and the robust GDP report for the first quarter indicated a potential shift in Fed policy towards a more hawkish stance.
The expectation of prolonged higher interest rates has led to a decrease in the likelihood of rate cuts by the Fed, impacting gold prices negatively as the opportunity cost of holding the precious metal increases. This adjustment in expectations has contributed to the decline in gold prices over the past few weeks.
Market reactions
The rise in the dollar to nearly six-month highs resulted in a decline in other precious metals as well. Silver prices fell by 0.2% to $943.95 an ounce, and platinum prices dropped by 0.2% to $26.598 an ounce.
Copper prices facing challenges
Amidst pressure from a stronger dollar and profit-taking following stellar gains in April, copper prices fell from their two-year highs. The industrial metal saw a decrease on the London Metal Exchange, with fears of slowing economic growth looming as interest rates are expected to stay elevated. Despite significant gains in April driven by supply constraints and production cuts, the outlook for copper remains uncertain in the near term.
