Investing.com-- Gold prices experienced a decline in Asian trade on Thursday after hitting record highs, with market focus shifting towards U.S. interest rate cuts and concerns about a potential recession.
After reaching unprecedented levels earlier this week, the yellow metal saw a pullback due to profit-taking and a strengthening dollar.
Gold prices dropped by 0.5% to $2,500.55 an ounce, while futures for December fell by 0.4% to $2,547.05 an ounce. Spot gold had reached a peak of $2,532.05 an ounce on Wednesday.
Rate cut expectations persist amidst recession worries
The surge in gold prices came as the minutes from the Fed’s late-July meeting revealed a strong inclination towards lowering interest rates in the near future. This has solidified expectations for a rate cut in September, although the degree of the cut is still uncertain.
Concerns over a potential recession were fueled by a significant downward revision in payrolls data for the year up to March 2024, released on Wednesday. This has led to renewed fears about a weakening labor market in the U.S.
While the possibility of a recession has dampened overall market sentiment, gold prices were also affected by profit-taking activities and a rebound in the dollar from recent lows.
All eyes are now on an upcoming speech by Fed Chair Jerome Powell at the Jackson Hole Symposium on Friday, which could provide further insights into the central bank’s monetary policy direction.
Lower interest rates are generally positive for gold as they reduce the opportunity cost of holding non-yielding assets. This has also led to mild gains in other precious metals, although they closely followed gold’s movements.
Silver prices dropped by 0.4% to $970.0 an ounce, while platinum prices fell by 0.3% to $29.448 an ounce.
Copper prices decline amid global growth concerns
In the industrial metals sector, copper prices faced a setback on Thursday due to worries about slowing U.S. growth. Ongoing concerns about a potential slowdown in China also weighed on prices, despite some improvement in copper demand in the country this week.
Benchmark copper on the London Metal Exchange held steady at $9,262.50 a ton, while one-month futures fell by 0.2% to $4.1930 a pound.
Analysis: The recent volatility in gold prices and the broader financial markets can be attributed to growing uncertainty surrounding U.S. interest rate cuts and fears of an impending recession. Investors are closely monitoring developments in central bank policies and economic data releases for further guidance. Lower interest rates are generally seen as supportive of gold prices, while concerns about global economic growth could continue to impact industrial metals like copper. It is important for investors to stay informed and diversify their portfolios to mitigate risks in this challenging market environment.