Gold prices stabilized after briefly touching key highs in Asian trading on Wednesday, as the prospect of no more Fed rate hikes galvanized the market initially, but the release of the Fed minutes from its late-October meeting on Tuesday weakened expectations of a near-term interest rate cut, leading to a pullback in the price of gold.
The Fed minutes showed that the central bank is committed to maintaining a higher long-term interest rate outlook, raising questions about whether the Fed will start cutting rates as early as March 2024, as some market participants expect. Uncertainty over the Fed’s rate hike path has weighed on gold prices, which have been rising in recent weeks as markets bet on the Fed coming to the end of its tightening cycle.
Spot gold was flat at $1,999.39 an ounce as of 00:21 ET (05:21 GMT), while gold futures due in December were steady at $2,000.65 an ounce. Futures rose as high as $2,009.80 an ounce on Tuesday, but gave back some of those gains after the release of Federal Reserve minutes.
The prospect of rising long-term interest rates is a headwind for gold, as higher interest rates typically reduce the attractiveness of interest-free assets such as gold to investors. However, in the face of global economic uncertainty, gold’s appeal as a safe-haven asset may provide some support.
The U.S. dollar, which usually moves in the opposite direction to gold, paused its recent decline on Wednesday and recovered slightly from a near three-month low, which also put pressure on gold prices.
Despite the recent retreat, gold prices are still up nearly 10% so far in 2023, helped by some safe-haven demand and improved investment sentiment.
In the industrial metals space, copper prices retreated from a two-month high on Wednesday as traders waited for more economic clues from China, the largest importer. Copper futures fell 0.4% to $3.7897 a pound.
Media reports that the Chinese government is planning more stimulus measures, particularly for the real estate sector, provided some initial support for copper prices. However, traders are cautious, waiting for concrete actions from Beijing to confirm these reports.
In addition, traders are closely monitoring supply disruptions in the global copper market following the closure of major mines in Peru and Panama. These disruptions are expected to tighten copper supply in the coming months and could provide some upside support for copper prices.