Gold prices experienced a slight rise in Asian trade on Thursday but remained below key levels as the dollar rebounded due to growing uncertainty about when the Federal Reserve would start trimming interest rates. Investors, cautious about buying outside the dollar ahead of key nonfarm payrolls data, found the greenback presenting more headwinds to non-yielding assets like gold.
Despite a strong run-up in the final days of 2023, fueled by optimism that the Fed might cut rates as early as March 2024, gold faced profit-taking at the start of the new year. Additionally, traders tempered expectations for early rate cuts from the central bank.
Spot Gold: Rose 0.1% to $2,043.68 an ounce.
Gold Futures: Increased 0.4% to $2,050.95 an ounce.
Both instruments had declined about 1% in the first two days of 2024. The uncertainty about the timing of rate cuts persisted after the release of the Fed’s December meeting minutes, contributing to gold’s losses. While most Fed officials expected interest rates to fall by up to 75 basis points in 2024, there was little consensus on the timing of these cuts.
Investors are closely watching the labor market’s strength, with nonfarm payrolls data expected to provide more cues on the economic outlook. The CME Fedwatch tool showed a 65% chance for a 25 basis point rate cut in March, down from over 70% earlier in the week. Gold, despite its early 2024 weakness, still carried over a 10% gain from 2023 and is anticipated to benefit from easing interest rates this year.
Copper Dips Amid Chinese Headwinds
Copper prices extended recent losses due to pressure from the dollar and renewed concerns about China, a key copper importer. Copper futures expiring in March fell 0.5% to $3.8502 a pound.
The red metal faced additional selling pressure after Fitch downgraded the credit ratings of four major Chinese state-backed asset managers, expressing concerns about China’s property market and inconsistent government support. This move raised worries about China’s economic conditions affecting its copper demand.