Investing.com– Gold prices saw a decline in Asian trading on Thursday, nearing the breaking point of key levels due to reduced safe haven demand and expectations of extended U.S. interest rates, causing damage to the precious metal.
Impact of Decreased Safe Haven Demand
Gold prices had taken a significant drop from their record highs in the previous week. The potential conflict between Iran and Israel, which did not escalate as feared by the markets, led to a decrease in safe haven demand for gold. This lack of safe haven demand exposed gold to headwinds from U.S. rates, as higher-for-longer rates increase the opportunity cost of investing in gold.
Current Gold Prices
The price of gold fell by 0.1% to $2,313.62 per ounce, while gold futures expiring in June dropped by 0.6% to $2,325.05 per ounce. The strength of the U.S. dollar, which remained near recent five-month peaks, also contributed to the downward pressure on gold prices.
Gold’s Next Movements and U.S. Economic Cues
Spot prices are now on the brink of falling below the $2,300 an ounce support level, signaling the possibility of further short-term declines for gold. The upcoming cues on the U.S. economy and interest rates are expected to be the main driving factors for gold’s next movements.
Factors Affecting Gold Prices
The first-quarter U.S. GDP data scheduled for release later on Thursday will provide insights into the resilience of the world’s largest economy at the beginning of 2024. Additionally, the inflation data, which is the Federal Reserve’s preferred gauge, will have a significant impact on gold prices as it directly influences the central bank’s interest rate outlook.
Effects on Other Precious Metals and Industrial Metals
Apart from gold, other precious metals also experienced a decline on Thursday after tumbling from recent peaks. Silver fell by 0.3% to $910.30 per ounce, while platinum dropped by 1% to $27.078 per ounce.
In the realm of industrial metals, copper prices retreated further from recent two-year highs due to weak economic indicators and concerns over high interest rates. Copper on the London Metal Exchange fell by 0.2% to $9,773.0 a ton, while copper futures declined by 0.1% to $4.4510 a pound. Despite tighter markets resulting from western sanctions on Russian metal exports, Chile’s announcement of increased copper output in 2024 dampened optimism in the copper market.
Looking at demand, worries also emerged after U.S. purchasing managers index data for April was weaker than expected, causing the PMI to fall back into contraction territory.
