Investing.com-- Gold prices fell slightly in Asian trade on Tuesday, but remained close to record highs amid growing conviction that the Federal Reserve will cut interest rates by a wide margin this week.
The yellow metal hit a record high on Monday and traded just below those levels as traders began pricing in a 50 basis point rate cut by the Fed on Wednesday. Strength in gold came following weakness in the dollar and Treasury yields.Â
Gold futures fell 0.2% to $2,578.03 an ounce, while spot gold expiring in December fell 0.1% to $2,605.05 an ounce by 23:56 ET (03:56 GMT).Â
Gold benefits from bets on 50 bps cutÂ
Spot prices hit a record high of $2,589.69 an ounce on Monday, as the dollar fell on bets of a bigger rate cut. The Fed is set to conclude a meeting on Wednesday.
Traders were seen pricing in a 68% chance the Fed will cut rates by 50 bps at the conclusion of a meeting on Wednesday, and a 32% chance of a 25 bps cut, data showed.Â
Lower rates bode well for gold and other precious metals, given that they reduce the opportunity cost of investing in non-yielding assets. The Fed is widely expected to signal the start of an easing cycle this week, which could see interest rates drop by over 100 bps by the end of the year.Â
The yellow metal also benefited from a swathe of central bank buying this year, especially in the emerging market space. This saw bullion prices perform better than other precious metals.
Silver rose 0.2% to $990.50 an ounce, while platinum steadied around $31.145 an ounce.Â
Copper ticks higher, China stimulus in focusÂ
Among industrial metals, copper prices rose slightly on Tuesday, also benefiting from a weaker dollar and bets on lower interest rates.
But gains in the red metal were held back by persistent concerns over top importer China, following a string of weak economic readings from the country for August.Â
Benchmark copper on the London Metal Exchange rose 0.1% to $9,388.50 a ton, while one-month copper rose 0.3% to $4.2770 a pound.
Weak readings from China furthered bets that Beijing will have to roll out more stimulus measures to support the economy.Â
Analysis:
The article discusses how gold prices are near record highs due to expectations of a Federal Reserve interest rate cut. This has led to increased investor interest in gold as a safe-haven asset. Lower interest rates make non-yielding assets like gold more attractive. Additionally, central bank buying and emerging market demand have supported gold prices. In contrast, concerns about China's economy have impacted copper prices, despite a weaker dollar and expectations of lower interest rates. Overall, the article highlights the impact of central bank policies and economic data on precious metal prices, providing valuable insights for investors.