In the realm of Asian trade on Thursday, gold prices experienced a decline, edging dangerously close to breaching crucial thresholds as concerns over interest rates lingered, exerting pressure on the precious metal.
Having plummeted significantly from its record highs in the past week, gold found itself grappling with diminished safe haven appeal, primarily attributed to the lack of escalation in tensions between Iran and Israel, a scenario that had been a source of apprehension in the markets.
The dwindling allure of gold as a safe haven rendered it susceptible to the headwinds generated by U.S. interest rates, particularly in the context of expectations for prolonged elevated rates, which elevate the opportunity cost of investing in the metal.
As of 00:26 ET (04:26 GMT), spot gold saw a slight dip of 0.1% to $2,313.62 per ounce, while gold futures set to expire in June experienced a more notable decline of 0.6% to $2,325.05 per ounce. The continued strength of the dollar, hovering near recent five-month highs, further exacerbated the downward pressure on metal prices.
The looming prospect of gold breaching the critical support level of $2,300 per ounce signifies the potential for further short-term losses in the yellow metal, a development that hinges significantly on forthcoming indicators regarding the U.S. economy and interest rate trajectories.
Market observers anticipate that the forthcoming release of first-quarter U.S. gross domestic product data later on Thursday will offer insights into the resilience of the world’s largest economy in the initial stages of 2024. Additionally, attention is directed towards the Personal Consumption Expenditures (PCE) price index data, which serves as the Federal Reserve’s preferred measure of inflation and is poised to influence the central bank’s stance on interest rates.
The recent prevalence of hotter-than-anticipated U.S. inflation metrics and hawkish signals from the Federal Reserve have led traders to recalibrate their expectations, notably scaling back projections for a June rate cut. Such a scenario augurs further near-term pressure on gold prices.
In parallel, other precious metals witnessed a retreat on Thursday following their descent from recent peaks over the preceding week. Platinum futures registered a decline of 0.3% to $910.30 per ounce, while silver futures experienced a more pronounced drop of 1% to $27.078 per ounce.
Meanwhile, in the domain of industrial metals, copper prices extended their retreat from recent two-year highs, influenced by lackluster economic data and apprehensions regarding elevated interest rates, which tempered optimism surrounding tighter market conditions.
Three-month copper futures on the London Metal Exchange sustained a 0.2% decrease, settling at $9,773.0 per ton, while one-month copper futures exhibited a marginal decline of 0.1%, reaching $4.4510 per pound. Both contracts fell short of the two-year peaks observed earlier in April, a trend that emerged subsequent to the imposition of stricter Western sanctions on Russian metal exports, signaling the prospect of tighter market dynamics.
However, enthusiasm surrounding the constrained supply narrative was dampened by indications from Chile, the leading copper producer, signaling an intention to increase output through state-owned copper miner Coldeco in 2024.
Furthermore, concerns pertaining to sustained demand were amplified following weaker-than-anticipated U.S. purchasing managers index data for April, which signaled a contraction in the manufacturing sector.