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Wednesday, 22. May 2024

Gold prices stuck in range as dollar dominates ahead of further rate cues


Gold prices remained within a narrow range during Asian trading on Wednesday, with a recent rebound being hindered by the strong performance of the dollar. Investors are awaiting further indicators on inflation and interest rates.

Gold prices declined from their recent record highs over the past two weeks, with the downward momentum attributed to dovish signals from other major central banks, which inclined traders towards the dollar. In Asian trade, the dollar index saw a slight increase and approached a one-month high.

Spot gold remained steady at $2,179.98 per ounce, while gold futures expiring in April saw a marginal increase to $2,178.60 per ounce as of 00:25 ET (04:25 GMT).

Gold under pressure from robust dollar ahead of PCE data and Fed remarks

Gold prices saw some gains overnight, but the continued strength of the dollar tempered further upward momentum.

Traders continued to favor the dollar following dovish signals from central banks like the Swiss National Bank and the Bank of England, which positioned the greenback as the sole high-yielding, low-risk currency.

Anticipation surrounding the upcoming release of key PCE price index data, the Fed’s preferred inflation gauge, along with comments from top Fed officials later in the week, bolstered demand for the dollar. Traders eagerly awaited these indicators for further insights into potential U.S. interest rate cuts.

Despite expectations of the Fed initiating rate cuts in June, gold’s upside potential in the near term is anticipated to be limited. However, the yellow metal is projected to benefit from lower interest rates later in the year.

Platinum futures edged up 0.1% to $918.50 an ounce, while silver futures declined 0.2% to $24.573 an ounce.

Copper prices slipped as China’s demand outlook stayed weak

Copper prices continued to retreat from 11-month highs on Wednesday amid prevailing pessimism towards China, the top importer of the metal.

Three-month copper futures on the London Metal Exchange declined by 0.4% to $8,836.00 a ton, while one-month U.S. copper futures dropped by 0.3% to $3.9932 a pound.

Chinese industrial profits increased by 10.2% in the first two months of 2024, according to data released on Wednesday. However, much of this growth was attributed to a lower base for comparison from the previous year.

Optimism regarding Chinese demand has been tempered by recent inventory data indicating robust stockpiles of copper in China thus far in 2024. This has countered expectations of a potential supply shock in copper following announcements by several major Chinese refiners to cut production.


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