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Gold prices pulled back from record highs in Asian trade on Thursday, as the yellow metal’s rally cooled. The market remains focused on potential U.S. interest rate cuts and rising recession fears, which have created a volatile environment for precious metals.
After surging to unprecedented levels earlier in the week due to growing expectations that the Federal Reserve will begin cutting rates in September, gold experienced a mix of profit-taking and a rebound in the dollar. This combination led to a decline in prices on Thursday.
As of 00:15 ET (04:15 GMT), spot gold had fallen 0.5% to $2,500.55 an ounce, while gold futures for December delivery dropped 0.4% to $2,547.05 an ounce. On Wednesday, spot gold had reached a peak of $2,532.05 an ounce.
Rate Cut Bets Persist, but Recession Fears Loom
Gold’s recent record highs were largely driven by the minutes from the Federal Reserve’s late-July meeting, which indicated that policymakers were leaning toward lowering interest rates as inflation shows signs of easing. The minutes have solidified market expectations for a rate cut in September, though traders remain divided on whether the reduction will be 25 or 50 basis points, as indicated by CME FedWatch.
However, a significant downward revision in U.S. payrolls data for the year ending in March 2024, released on Wednesday, has renewed fears of a potential U.S. recession. While these recession concerns have limited broader risk-on movements in financial markets, gold prices still fell due to profit-taking, and the U.S. dollar recovered from its recent seven-month lows.
Market participants are now closely watching Fed Chair Jerome Powell’s upcoming address at the Jackson Hole Symposium on Friday for further indications of the central bank’s direction.
Other Precious Metals and Industrial Metals Update
Lower interest rates generally benefit gold, as they reduce the opportunity cost of holding non-yielding assets. Other precious metals also saw minor gains based on this sentiment, though they largely followed gold’s movements. Platinum futures fell 0.4% to $970.0 an ounce, while silver futures declined 0.3% to $29.448 an ounce.
In the industrial metals market, copper prices struggled as a recovery rally stalled on Thursday due to renewed concerns about slowing U.S. economic growth. Ongoing worries about a slowdown in China, the world’s largest copper consumer, also weighed on the market, despite marginal improvements in copper demand in the country this week. Benchmark copper futures on the London Metal Exchange remained steady at $9,262.50 per ton, while one-month copper futures fell 0.2% to $4.1930 per pound.
The mixed signals from both the precious and industrial metals markets reflect the broader uncertainty in global economic conditions, as traders navigate the potential for recession alongside the prospect of lower interest rates.
