Gold Prices Rise as Dollar Slips After Fed Rate Cut, Markets Eye Further Reductions

Gold prices edged higher in Asian trading on Friday, supported by a weaker dollar following the Federal Reserve’s aggressive interest rate cut. The move has bolstered optimism for more rate reductions, driving demand for the precious metal as a hedge against currency weakness and economic uncertainty.

Gold Reacts to Fed’s Rate Cut

Spot gold rose by 0.3% to $2,593.31 an ounce, while December gold futures gained 0.2%, reaching $2,618.40 an ounce by early Friday. This marks a positive reversal for gold, which had initially dipped in reaction to Wednesday’s rate cut announcement. The initial decline came after Fed Chair Jerome Powell provided a less dovish outlook for long-term rates, signaling a more measured approach to monetary policy.

However, the broader market welcomed the Federal Reserve’s decision to slash rates by 50 basis points, marking the beginning of what could be a substantial easing cycle. Lower rates tend to weaken the dollar, making gold more attractive to investors, particularly as a store of value amid economic shifts.

Safe-Haven Appeal Boosted by Geopolitical Tensions

Gold’s appeal as a safe-haven asset was further strengthened by escalating tensions in the Middle East. Reports of Israeli forces allegedly exploding electronic devices linked to Hezbollah have raised concerns of a potential retaliation, contributing to risk-averse sentiment in global markets. This geopolitical uncertainty, coupled with the Fed’s rate cut, has fueled demand for gold as a protective asset.

Weekly Gains for Gold as Fed Begins Easing Cycle

Gold is on track to end the week with a 0.6% gain, reflecting increased confidence in the Fed’s easing approach. The central bank’s 50 basis point rate cut exceeded market expectations, and analysts believe further reductions could be on the horizon. Citibank analysts have forecasted another 50 basis point cut in November, potentially bringing the cumulative rate reduction to 125 basis points by year-end.

Copper Prices Rise on Hopes for China’s Stimulus

In industrial metals, copper prices also saw a lift on Friday, supported by reports that China, the world’s largest copper importer, may introduce more measures to bolster its property market. Copper, often seen as a barometer of economic health, has benefited from the possibility of additional Chinese stimulus, particularly after the People’s Bank of China left benchmark lending rates unchanged earlier this week.

As markets continue to react to central bank policies and geopolitical developments, gold’s safe-haven status and the prospect of further rate cuts could continue to drive its upward momentum in the near term.