Investing.com-- In the world of finance, gold prices experienced a slight dip in Asian trade on Tuesday, staying close to record highs. This movement comes as traders become more convinced that the Federal Reserve will kick off interest rate cuts in September, leading to weakness in the dollar.
Market participants are now eagerly awaiting further signals on interest rates from the Federal Reserve, with Chair Jerome Powell scheduled to speak at the Jackson Hole Symposium on Friday.
Gold prices fell 0.1% to $2,501.06 an ounce, while futures expiring in December dropped 0.1% to $2,538.70 an ounce by 00:59 ET (04:59 GMT).
Gold Hits Record Highs Amid Rate Cut Speculation
Spot prices reached a record high of $2,510.45 an ounce last week, with the precious metal seeing significant gains due to growing expectations of rate cuts by the Fed starting from September.
Traders have priced in a 76% probability of a 25 basis points rate cut by the Fed, with a 24% chance for a 50 bps cut, as indicated by market data.
Lower interest rates are favorable for gold, as they reduce the opportunity cost of investing in assets that do not yield returns.
Fed Chair Powell's upcoming speech on Friday is anticipated to provide more insights on the central bank's plans for rate cuts, although analysts do not foresee Powell explicitly mentioning the extent of the rate cuts.
Meanwhile, other precious metals displayed mixed performance, with platinum dropping 0.1% to $964.65 an ounce, while silver rose 0.4% to $29.415 an ounce. Silver outperformed platinum, rising in line with the recent gains in gold.
Copper Prices Dip Due to Escondida Strike Avoidance
In the realm of industrial metals, copper prices experienced a decline on Tuesday, reversing previous gains as BHP Group Ltd managed to prevent a labor strike at Chile's Escondida mine, the largest copper mine globally.
The benchmark copper price on the London Metal Exchange fell 0.3% to $9,226.50 a ton, while one-month copper futures dropped 0.6% to $4.1720 a pound.
BHP successfully reached an agreement with labor unions at the Escondida mine on Sunday, thwarting a potential strike that could have significantly restricted global copper supplies.
Escondida contributes to 5% of global copper supplies, with a 40-day strike at the mine in 2017 substantially boosting copper prices at that time.
Despite supply disruptions being a key factor, copper prices have been facing notable losses throughout August due to concerns about weakening demand, particularly in China, the top importer of copper.
Analysis and Breakdown:
In a nutshell, the recent movements in gold and copper prices are heavily influenced by speculations surrounding rate cuts by the Federal Reserve. As the likelihood of rate cuts increases, gold prices tend to rise due to reduced opportunity costs for investors. On the other hand, copper prices faced a setback as a potential strike at a major mine was averted, easing concerns about supply disruptions. However, ongoing worries about weakening demand, especially from China, have been weighing on copper prices. Investors should closely monitor central bank policies and global economic indicators to make informed decisions regarding their investments in precious metals and industrial metals.