Gold prices in Asia experienced a decline on Thursday, staying near recent lows due to the Federal Reserve’s updated outlook on interest rate cuts, which poses challenges for the yellow metal. This drop in gold prices occurred despite a weaker dollar in overnight trading. The greenback stabilized on Thursday following a more hawkish stance from the Fed. The price of gold futures for August also decreased, showcasing the impact of the Fed’s revised rate cut expectations.
Broader metal prices suffered on Thursday as Fed Chair Jerome Powell disclosed that the central bank anticipates only one interest rate cut this year, contradicting previous expectations of three cuts. Some policymakers even argued against any rate cuts, pointing to persistent inflation concerns. The Fed’s higher inflation forecast and the potential for extended high interest rates do not bode well for gold and other precious metals, as it increases the opportunity cost of investing in non-interest-bearing assets. Signs that major central banks, such as the People’s Bank of China, reduced their gold purchases in May also contributed to the declines in gold prices.
In addition to gold, other precious metals experienced decreases, with silver and platinum prices also dropping on Thursday. Industrial metals, particularly copper, faced losses as well due to the negative economic outlook associated with the potential for high interest rates. Concerns over additional stimulus measures in China, a top importer of copper, added to the downward pressure on copper prices. The mixed economic recovery in China raised uncertainties about future demand for industrial metals.
