Aug 5 2024: Gold prices edged lower on Monday but remained close to record highs as the metal continued to attract safe-haven demand amid escalating worries about slowing economic growth.
As of 06:00 ET (10:00 GMT), spot gold fell by 0.8% to $2,424.01 per ounce, while December gold futures decreased by 0.2% to $2,464.15 per ounce.
A weaker dollar also supported the metal markets, as a series of weak U.S. economic indicators led traders to anticipate more significant interest rate cuts in the U.S. this year.
Gold Benefits from Safe-Haven Demand; Record High Approaches
Gold futures briefly surpassed record highs of $2,500 per ounce in recent sessions. However, spot prices, which reflect immediate demand for gold, were trading about $30 below the record high of $2,483.78 per ounce set in July.
The metal gained from safe-haven demand after several disappointing U.S. economic reports, particularly concerning manufacturing activity and the labor market, heightened concerns about a faster-than-expected slowdown in the world’s largest economy.
This prompted a massive sell-off in most risk-driven markets, including equities, Treasuries, and foreign exchange, thereby increasing safe-haven bets on gold.
The World Gold Council reported last week that total demand reached 1,258.2 metric tons in the second quarter, the highest on record for that period and about 4% higher than the same period in 2023.
The most significant increase in demand came from the Over The Counter (OTC) market, which includes purchases by institutional investors, high net-worth individuals, and family offices. The Council attributed this surge to “portfolio diversification,” raising questions about the sustainability of this demand.
The potential for a weaker economy also led traders to anticipate deeper interest rate cuts by the Federal Reserve, which recently indicated a possible rate cut in September.
The central bank might reduce rates by 50 basis points in September and could end the year with rates down by 100 basis points, according to CME FedWatch.
Such a scenario is favorable for gold, as lower interest rates reduce the opportunity cost of investing in non-yielding assets.
Other precious metals largely benefited from this outlook.
Silver futures rose by 2.6% to $27.655 per ounce, while platinum futures declined by 3.7% to $931.85 per ounce.
Copper Slips Despite Positive Chinese Data
Among industrial metals, copper prices fell on Monday despite positive economic data from China, the top importer.
Benchmark copper futures on the London Metal Exchange dropped by 1.1% to $8,960.50 per tonne, while one-month copper futures declined by 1.5% to $4.0420 per pound.
Private purchasing managers’ index data on Monday indicated that China’s services sector grew more than expected in July, suggesting resilience in some areas of the economy despite a decline in manufacturing activity. This improved sentiment towards China, which has otherwise been a significant concern for copper.
However, increasing fears of an economic slowdown in China, which could reduce copper demand, saw copper prices fall to near four-month lows in recent sessions. The prospect of a global economic slowdown also poses challenges for the red metal.