Despite recent subdued performance, gold remained within a narrow trading range of $2,000 to $2,050 established over the past month. The metal’s upside was limited by ongoing concerns about higher U.S. interest rates, with the Federal Reserve signaling no rush to begin rate cuts in early 2024. Additionally, the strength of the dollar, hovering near three-month highs, further weighed on gold prices.
However, gold held firm above the crucial support level of $2,000 an ounce, indicating persistent safe-haven demand driven by fears of a global economic slowdown and geopolitical tensions, particularly in regions like Russia and the Middle East.
Spot gold stabilized at $2,030.69 an ounce, while gold futures for April delivery dipped 0.2% to $2,039.45 an ounce by 00:20 ET (05:20 GMT). Despite the challenges posed by interest rate expectations and currency strength, gold maintained its resilience amid ongoing uncertainties in global markets.
PCE inflation, GDP data awaited for more cues
As markets await crucial inflation and economic growth data for further trading cues, all eyes are on the upcoming release of the Personal Consumption Expenditures (PCE) price index data, scheduled for Thursday. This metric, being the Federal Reserve’s preferred measure of inflation, is expected to indicate persistent inflationary pressures in January, potentially reinforcing the Fed’s inclination to maintain higher interest rates for an extended period.
Recent statements from several Fed officials have echoed this sentiment, cautioning against premature interest rate cuts due to sticky inflation levels. This stance suggests that the Fed may delay any adjustments to interest rates in the near term.
In addition to the inflation data, investors are also anticipating the second reading on fourth-quarter Gross Domestic Product (GDP), scheduled for later on Wednesday. While this reading may indicate some moderation in economic growth, the U.S. economy is still poised to outperform its counterparts in the developed world, providing the Fed with the latitude to keep interest rates elevated.
The prospect of higher interest rates tends to exert downward pressure on gold prices, as it raises the opportunity cost of holding non-yielding assets like bullion. Consequently, other precious metals also retreated, with platinum futures declining by 0.5% to $892.05 per ounce, and silver futures falling by 0.7% to $22.602 per ounce on Wednesday. This movement reflects market expectations of a prolonged period of higher interest rates, impacting the broader landscape of precious metal prices.
Copper prices dip, China PMIs awaited
Copper futures, which are set to expire in March, experienced a decline of 0.4%, settling at $3.8390 per pound. This setback comes after a robust ascent in recent weeks, fueled by optimism surrounding additional stimulus initiatives in China, the leading importer of the red metal.
However, the sustainability of this rally faces scrutiny as investors await the release of crucial purchasing managers index (PMI) data from China, scheduled for Friday. The PMI figures are highly anticipated as they offer valuable insights into the prevailing business activity levels during February. These data points will likely play a significant role in determining the trajectory of copper prices moving forward, providing market participants with a clearer understanding of the economic landscape in China, a key driver of global copper demand.