Feb 20 2024: Gold prices showed little movement during Asian trading on Tuesday amidst ongoing apprehensions about prolonged elevated interest rates, while a U.S. market holiday contributed to subdued trading activity.
Having found some support around the $2,000 an ounce mark, gold rebounded notably from a two-month low over the past two sessions. However, despite the recovery, gold remained firmly entrenched within a trading range of $2,000 to $2,050, a range that has persisted throughout most of 2024.
Spot gold prices edged up 0.1% to $2,019.17 per ounce, while gold futures for April delivery steadied at $2,030.20 per ounce by 23:34 ET (04:34 GMT).
While recent geopolitical tensions in the Middle East and between Russia and Ukraine provided some backing to gold, its potential gains have been hampered by the expectation of sustained higher U.S. interest rates. Traders have gradually discounted the likelihood of early interest rate cuts by the Federal Reserve following several months of hotter-than-expected U.S. inflation data and cautious remarks from Fed officials.
The prospect of higher interest rates negatively impacts non-yielding assets like gold by increasing the opportunity cost of holding the precious metal.
Despite a murky near-term outlook, analysts at Citi projected that gold could surge to $3,000 per ounce by 2025, particularly if central banks increase their gold holdings, inflation subsides, and the global economy experiences a significant downturn in the coming year.
However, immediate prospects for gold remained uncertain, with other precious metals also experiencing weakness. Platinum futures declined by 0.4% to $903.10 per ounce, while silver futures slipped by 0.1% to $23.023 per ounce.
Copper Prices Unmoved by China Rate Cut
In the realm of industrial metals, copper prices dipped slightly on Tuesday, showing little reaction to a larger-than-anticipated benchmark interest rate cut in China, the largest importer of copper.
March copper futures fell by 0.1% to $3.8087 per pound.
The People’s Bank of China reduced its benchmark five-year loan prime rate by a greater-than-expected 25 basis points to 3.95%, aiming to further ease monetary conditions and bolster economic recovery. However, investors questioned whether this move would significantly benefit the Chinese economy, given that Chinese interest rates have been at historic lows for almost two years.
Beyond concerns about economic slowdowns in major copper importers like the UK and Japan, both of which entered recession in late 2023, worries about decelerating global economic growth have amplified, potentially dampening copper demand.
