Investing.com– Gold prices continued to decline in Asian trade on Thursday, moving further away from recent record highs as worries about high interest rates and diminishing safe haven demand weighed on the precious metal.
## Impact of Fed Meeting Minutes on Rate Fears
The drop in gold prices was influenced by a rebound in the US dollar, which reached a one-week high following the release of minutes from the Federal Reserve’s late-April meeting. The minutes revealed growing concerns among policymakers about persistent inflation. While some officials discussed the possibility of further interest rate hikes to combat inflation, it was seen as unlikely. However, the general sentiment from the Fed indicates a willingness to maintain elevated interest rates for a longer period due to concerns about inflation remaining above the 2% target.
The prolonged period of high rates poses a challenge for gold and other precious metals as it increases the cost of holding onto these assets, making them less attractive to investors. This has hindered gold’s ability to sustain its record highs throughout the year. Despite the geopolitical tensions in the Middle East following the death of the Iranian President, which would typically drive demand for safe-haven assets like gold, the lack of escalation in the region also contributed to the decline in gold prices.
## Additional Insight on Copper Price Movement
In addition to gold, industrial metals like copper also experienced a decline in prices, with copper prices dropping significantly from their peak levels due to profit-taking and pressure from the strength of the dollar. However, copper prices stabilized in Asian trade after the sharp decline.
The decline in copper prices was largely attributed to a calming down of the speculative fever that had been driving the red metal’s prices higher, allowing room for profit-taking after a period of strong gains. Moreover, concerns about China’s economy resurfaced as tensions between the US and China escalated, casting doubt on the effectiveness of recent stimulus measures implemented by Chinese authorities.
By providing additional insight into the dynamics affecting gold and copper prices, investors can make more informed decisions when considering investments in precious metals and industrial metals.
