Gold prices dip, weighed by dollar strength as rate jitters grow

Published 30/05/2024, 04:54
© Reuters.
- Gold prices fell in Asian trade on Thursday, weighed chiefly by strength in the dollar and U.S. Treasury yields as traders remained on edge before key economic readings that are likely to factor into interest rates. 

The greenback rose to an over two-week high as fears of high-for-longer U.S. interest rates kept traders largely biased towards the greenback. Benchmark U.S. Treasury yields also rose this week.

This trend drove some flows out of gold, driving the yellow metal further away from record highs hit last week. The yellow metal also lost most of its gains made this week. 

Spot gold fell 0.2% to $2,332.98 an ounce, while gold futures fell 0.4% to $2,331.60 an ounce just ahead of their expiry on June 1. 

Gold prices pressured, more rate cues approach 

The yellow metal was pressured by anticipation of more U.S. economic readings in the coming days, which are likely to factor into the outlook for interest rates.

A revised reading on first-quarter gross domestic product data is due later on Thursday, and is likely to show some resilience in the economy. Strength in the economy also gives the Federal Reserve more headroom to keep rates high for longer.

More closely watched will be PCE price index data, due on Friday. The reading is the Fed’s preferred inflation gauge.

The data prints come after several Fed officials warned that the bank had little confidence to begin trimming interest rates. This also saw traders begin pricing out expectations for a rate cut in September. 

The prospect of high for longer interest rates bodes poorly for gold and other precious metals, given that it pushes up the opportunity cost of investing in the yellow metal.

Other precious metals also fell tracking this notion. Platinum futures sank 0.6% to $1,040.15 an ounce, while silver futures slid nearly 2% to $31.767 an ounce.

Copper rally cools, more China cues awaited 

Among industrial metals, copper prices fell further from recent record highs on Thursday, as a speculative frenzy cooled and as traders now sought more cues on demand from key economic data from China, the world’s biggest copper importer.

Benchmark copper futures on the London Metal Exchange fell 1.3% to $10,346.50 a tonne, while one-month copper futures fell 1.1% to $4.7237 a pound. 

Purchasing managers index from China is due on Friday, and is set to provide more cues on business activity in the country, which in turn is expected to help traders better gauge the outlook for copper demand. 

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