Feb 22 2024: In Asian trading on Thursday, gold prices continued to exhibit rangebound behavior as signals from the Federal Reserve reinforced the anticipation of extended higher interest rates in the United States.
While the dollar’s decline from its recent three-month highs provided some relief to bullion prices earlier in the week, further downward movement for the greenback was restricted by Treasury yields remaining close to recent peaks.
Gold largely traded within the $2,000 to $2,050 per ounce range established over the past month. Although the possibility of heightened interest rates hindered additional gains in the precious metal, concerns over worsening global economic conditions, particularly with Japan and the UK entering recessions, restrained its downside potential.
Spot gold saw a marginal increase of 0.2%, reaching $2,029.78 per ounce, while gold futures for April delivery rose by 0.3% to $2,039.55 per ounce as of 00:13 ET (05:13 GMT).
The release of minutes from the Fed’s late-January meeting reiterated the central bank’s cautious stance regarding early interest rate cuts. This sentiment echoed throughout the week with various Fed officials expressing concerns over persistent inflation and the robustness of the US economy.
As a result, traders adjusted their expectations, significantly reducing the likelihood of rate cuts in March and May, while anticipating the Fed to maintain rates in June. According to the CME Fedwatch tool, there was a 53.6% chance of a 25 basis point cut in June, with a 28.7% chance of rates remaining unchanged, up from 19.7% the previous week.
The prospect of prolonged higher interest rates poses challenges for gold as it elevates the opportunity cost of holding the precious metal. However, analysts at Goldman Sachs suggest that gold could benefit substantially from any rate cuts this year, while Citi analysts forecast the potential for gold prices to reach $3,000 per ounce by 2025.
Other precious metals experienced gains on Thursday but were recovering from significant losses in the prior session. Platinum futures rose by 0.4% to $894.10 per ounce, while silver futures increased by 0.6% to $23.012 per ounce.
In the industrial metals sector, copper prices stabilized at three-week highs as investors awaited potential additional stimulus measures from the Chinese government. Copper futures for March delivery hovered around $3.8792 per pound, marking a 1.1% increase for the week amidst anticipation of further support amidst three years of sluggish growth in the Chinese economy.