Gold prices touch $2,000 as markets weigh Fed rate outlook

  • Commodities News
Gold prices touch $2,000 as markets weigh Fed rate outlook
Credit: © Reuters. Gold prices steadied in Asian trade on Wednesday after briefly touching key highs as the prospect of no more rate hikes by the Federal Reserve spurred continued flows into the yellow metal.

But a rally in gold prices now appeared to have cooled, as the minutes of the Fed’s late-October meeting, released on Tuesday, showed the bank sticking to its higher-for-longer outlook on interest rates.

While markets remained convinced that the Fed will raise rates no further, the Fed minutes spurred some doubts over when the central bank will begin trimming rates. CME Group’s Fedwatch tool showed traders reconsidering expectations of a March 2024 rate cut. 

Spot gold was flat at $1,999.39 an ounce, while gold futures expiring in December steadied at $2,000.65 an ounce by 00:21 ET (05:21 GMT). Futures had risen as high as $2,009.80 an ounce on Tuesday, before cutting some gains after the Fed minutes.

Fed rate cut outlook uncertain as minutes reiterate higher-for-longer outlook 

Gold saw a series of strong gains in recent sessions, as weak U.S. labor and inflation data spurred increased bets that the Fed was done raising interest rates.

But the outlook for the yellow metal remained uncertain, especially given that the Fed likely plans to keep rates higher for longer. The central bank has signaled that rates will remain above 5% until at least end-2024.

The prospect of higher-for-longer rates bodes poorly for gold, given that rising rates push up the opportunity cost of investing in the yellow metal. This notion had battered gold over the past year, as the Fed embarked on one of its most aggressive rate hike cycles. 

Higher rates are also expected to keep gold gains limited in the coming months, or at least until the Fed signals a clear plan to begin loosening policy. The dollar paused a recent losing streak on Wednesday, and recovered slightly from near three-month lows, which also pressured gold prices.

Still, the yellow metal was trading up nearly 10% so far in 2023, aided by some safe haven demand as global economic conditions worsened. 

Copper dips from two-month high, more China, supply cues awaited

Among industrial metals, copper prices fell from two-month highs on Wednesday as traders awaited more economic cues from top importer China.

Copper futures fell 0.4% to $3.7897 a pound.

While media reports said that Beijing was planning to roll out more stimulus measures, particularly for the property sector, traders were now awaiting actual moves from the Chinese government. 

Traders were also watching for any more disruptions in global copper supply, following major mine closures in Peru and Panama, which are expected to tighten markets in the coming months.

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