Aug 1 2024: Gold prices stabilized in Asian trading on Thursday, following a surge close to record highs in the previous session after the Federal Reserve hinted at a possible interest rate cut in September.
The precious metal also saw increased safe-haven demand due to escalating concerns over a potential larger conflict in the Middle East, following the killing of Hamas leader Ismail Haniyeh in Tehran.
Spot gold steadied at $2,446.41 an ounce, while gold futures for December delivery rose 0.7% to $2,490.15 an ounce by 01:26 ET (05:26 GMT).
Rate Cut Speculation Supports Gold Prices
Gold prices soared on Wednesday, nearing a record high of $2,483.78 an ounce after the Fed held interest rates steady, as expected. Fed Chair Jerome Powell highlighted progress towards reducing inflation and a cooling labor market, and explicitly mentioned the possibility of a rate cut in September if data improves.
While the Fed still needs to consider more inflation and labor market data before its next meeting, markets are almost fully pricing in a 25 basis point cut in September, according to CME Fedwatch.
Lower interest rates are favorable for gold, as they reduce the opportunity cost of holding non-yielding assets. This week’s focus also includes the key nonfarm payrolls data for July, due on Friday.
Other precious metals had mixed performances but retained most of their gains from Wednesday. Platinum futures fell 0.2% to $984.40 an ounce, while silver futures rose 0.5% to $29.070 an ounce.
Copper Rebound Stalls Amid Weak Chinese Data
Industrial metals did not perform as well as precious metals, with copper’s rebound stalling due to weak economic signals from China, the largest copper importer.
Benchmark copper futures on the London Metal Exchange rose 0.2% to $9,243.50 a tonne, while one-month copper futures fell 0.3% to $4.1833 a pound.
Purchasing Managers Index (PMI) data from China indicated a broad slowdown in manufacturing activity. The Caixin manufacturing PMI data showed an unexpected contraction in the sector through July, aligning with a government reading from Wednesday.
The Caixin data negatively affected sentiment towards China, as it usually provides a more favorable economic outlook than the government PMI. Copper prices had rebounded from over five-month lows on Wednesday due to encouraging comments from Beijing, but the weak PMI data increased expectations for more stimulus measures. However, Thursday’s reading suggested that the government would need to take more substantial actions to support the economy.
