Gold prices steady ahead of Fed rate decision, long-term rate outlook in focus

Gold prices were largely steady in Asian trade on Wednesday after falling in the previous session, as the Federal Reserve kicked off its December policy meeting that is expected to conclude with a rate cut.

However, markets remain concerned about the long-term rate outlook in the U.S.. The Fed is expected to lower interest rates more gradually next year after cutting it at the end of its two-day meeting on Wednesday.

Spot gold  was largely unchanged at $2,646.10 an ounce, while gold futures  expiring in February were marginally lower at $2,660.72 an ounce by 22:51 ET (03:51 GMT).  Gold under pressure on expectations of slower Fed rate cut path in 2025

The Fed is widely expected to cut interest rates by 25 basis points, but the focus will be on the Fed's future economic projections and Chair Jerome Powell's comments.

Signals on the Fed’s long-term rate outlook remain in focus as inflation has remained stubborn and is expected to rise further under upcoming President Donald Trump.

Gold, unlike interest-bearing assets like bonds or savings accounts, does not generate income. Therefore, when interest rates are higher, the opportunity cost of holding gold increases, making it less attractive to investors.

Added to that, the dollar has remained strong, with the US Dollar Index remaining near a three-week high. Higher rates typically strengthen the dollar, further pressuring gold, as it is priced in dollars and becomes more expensive for foreign buyers. 

Additionally, higher rates often signal a stronger economy, which can reduce demand for gold as a safe-haven asset.

In addition to the Fed, the Bank of Japan and Bank of England are also scheduled to make rate decisions this week. The BOE is expected to keep rates steady, while markets are divided on whether the BOJ will raise rates further.

Other precious metals were also slightly weaker on Wednesday. Platinum futures fell 0.1% to $942.20 an ounce, while silver futures fell 0.3% to $30.845 an ounce. Copper falls on China demand woes

Among industrial metals, copper prices retreated on Wednesday as recent data from China, the world's largest consumer of copper, indicated weakening consumption and challenges in the property sector. 

Benchmark Copper Futures  on the London Metal Exchange fell 0.4% to $8,973.50 a ton, while one-month Copper Futures  declined 0.5% to $4.1255 a pound.

This was despite expectations of looser monetary policies and increased fiscal spending in the country. Reuters reported on Tuesday that Beijing will raise its budget deficit to 4% from 3% of gross domestic product in 2025- its highest on record, and will also target GDP growth of 5% for a third consecutive year.

Source: Investing.com