Gold weakens, but rate cut bets, safe haven demand keep prices above $2,500

Gold prices declined in Asian trade on Tuesday, pressured by a rebound in the dollar. However, the outlook for lower interest rates and increased safe-haven demand kept the precious metal close to recent highs.

In the industrial metals market, copper prices continued their upward trend, driven by expectations that lower interest rates could stimulate demand recovery in the coming months, helping to offset weakening demand from China, the world’s largest copper importer.

Spot gold dropped 0.4% to $2,507.15 per ounce, while December gold futures declined 0.5% to $2,542.05 per ounce by 00:54 ET (04:54 GMT).

Gold Near Record Highs Amid Rate Cut Expectations and Safe Haven Demand

Despite the dip, spot gold remained near its record high of approximately $2,532 per ounce, reached earlier in August. The metal’s appeal has been bolstered by growing confidence that the Federal Reserve will begin cutting interest rates in September, following several dovish signals from the central bank.

Traders are currently divided on whether the rate cut will be 25 or 50 basis points, according to the CME FedWatch tool. This week’s PCE price index data, the Fed’s preferred measure of inflation, is expected to provide further clarity on this issue.

Lower interest rates are generally positive for gold as they reduce the opportunity cost of holding non-yielding assets like precious metals.

Geopolitical risks have also increased the demand for gold as a safe haven. Ceasefire talks between Israel and Hamas have made little progress, while ongoing conflicts between Ukraine and Russia, along with rising tensions in Libya, have contributed to market uncertainty and driven up oil prices.

Other precious metals also fell on Tuesday, with the dollar’s rebound from 13-month lows adding pressure. Platinum futures fell 0.7% to $961.15 per ounce, and silver futures declined 0.5% to $30.30 per ounce.

Copper Extends Recovery on Rate Cut Hopes and China Optimism

Benchmark copper futures on the London Metal Exchange rose 0.6% to $9,361.50 per ounce after Monday’s holiday, while one-month copper futures increased 0.3% to $4.2780 per ounce.

Copper has seen a steady recovery in recent sessions, supported by expectations that Beijing will introduce further stimulus measures to counter worsening economic conditions in China. Additionally, the prospect of U.S. interest rate cuts has alleviated concerns of a potential recession, leading to optimism that a soft landing for the U.S. economy will help sustain copper demand.