Gold Prices Decline Amid Dollar Strength and Rate Uncertainty
Gold prices experienced a downturn in Asian trading on Thursday, primarily influenced by the strength of the dollar and U.S. Treasury yields, as investors awaited key economic indicators that could impact interest rate decisions.
The greenback surged to a level not seen in over two weeks, driven by concerns of prolonged high U.S. interest rates, which maintained a bullish bias towards the dollar. Concurrently, benchmark U.S. Treasury yields also saw an uptick this week, prompting some capital outflows from gold. Consequently, gold retreated further from its recent record highs, relinquishing most of the gains made earlier in the week.
Spot gold declined by 0.2% to $2,332.98 per ounce, while gold futures dipped by 0.4% to $2,331.60 per ounce, just ahead of their expiration on June 1.
Anticipation of Key Economic Data and Rate Outlook
Gold prices faced pressure amid anticipation of forthcoming U.S. economic releases that are likely to influence interest rate expectations. The revised reading of first-quarter gross domestic product (GDP) data, expected later on Thursday, is anticipated to reveal economic resilience, potentially bolstering the case for sustained high interest rates by the Federal Reserve.
Of particular significance will be the Personal Consumption Expenditures (PCE) price index data scheduled for release on Friday, serving as the Fed’s preferred inflation metric.
Fed Policy Guidance and Precious Metals Performance
Several Fed officials have recently cautioned against premature interest rate cuts, leading traders to reassess expectations for a rate cut in September. The prospect of prolonged high interest rates poses challenges for gold and other precious metals, as it increases the opportunity cost of holding non-yielding assets like gold.
This sentiment also weighed on other precious metals, with platinum futures declining by 0.6% to $1,040.15 per ounce, and silver futures sliding nearly 2% to $31.767 per ounce.
Cooling Copper Rally Amidst Economic Data Awaited
Copper prices retreated further from recent record highs as speculative activity cooled, with traders now awaiting key economic data from China, the world’s largest copper importer, for further insights into demand trends.
Benchmark copper futures on the London Metal Exchange fell by 1.3% to $10,346.50 per tonne, while one-month copper futures declined by 1.1% to $4.7237 per pound.
Traders are particularly focused on the Purchasing Managers Index (PMI) data from China, scheduled for release on Friday, which is expected to provide valuable signals about business activity and, consequently, copper demand outlook.
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