Gold prices hover above $2,500 with rate cuts, Powell speech in focus

Gold prices fell slightly in Asian trade on Tuesday, but remained close to record highs as traders grew more convinced that the Federal Reserve will begin cutting interest rates in September, which sparked weakness in the dollar. 

Markets are now awaiting more cues on interest rates from the Federal Reserve, with Chair Jerome Powell set to speak at the Jackson Hole Symposium on Friday. 

Spot gold fell 0.1% to $2,501.06 an ounce, while gold futures expiring in December fell 0.1% to $2,538.70 an ounce by 00:59 ET (04:59 GMT).  Gold hits record highs on rate cut bets 

Spot prices hit a record high of $2,510.45 an ounce last week, with the yellow metal logging strong gains amid growing conviction that the Fed will begin cutting rates from September.

Traders are pricing in a 76% chance the Fed will cut rates by 25 basis points, and a 24% chance for a 50 bps cut, CME Fedwatch showed.

Lower rates bode well for gold, given that they reduce the opportunity cost of investing in non-yielding assets.

An address from Fed Chair Powell, on Friday, is expected to offer more cues on the bank’s plans to cut rates, although analysts do not expect the Fed chair to explicitly mention by how much the central bank plans to cut rates.

Other precious metals were mixed, with platinum futures down 0.1% to $964.65 an ounce, while silver futures rose 0.4% to $29.415 an ounce. Silver was the better performer among the two, rising in tandem with recent gains in gold.  Copper dips as Escondida strike averted 

Among industrial metals, copper prices fell on Tuesday, reversing recent gains as BHP Group Ltd (ASX:BHP ) managed to avoid a labor strike at Chile’s Escondida mine- the biggest copper mine in the world. 

Benchmark copper futures on the London Metal Exchange fell 0.3% to $9,226.50 a ton, while one-month copper futures fell 0.6% to $4.1720 a pound.

BHP reached an agreement with labor unions at the Escondida mine on Sunday, averting a potential strike that stood to severely limit global copper supplies. 

Escondida accounts for 5% of global copper supplies, with a 40-day strike at the mine in 2017 having greatly boosted copper prices then.

Beyond supply disruptions, however, copper prices were nursing steep losses through August amid growing anxiety over weakening demand, especially in top importer China.

Source: Investing.com