Gold prices reached record highs in Asian trade on Tuesday as optimism over U.S. interest rate cuts continued to drive gains. The recent surge in gold comes after a significant rate cut by the Federal Reserve last week, with expectations of further cuts in the future.
Additionally, mixed purchasing manager index readings from major economies and ongoing tensions in the Middle East have further boosted demand for gold. The yellow metal rose 0.3% to $2,638.31 an ounce, while gold futures expiring in December climbed 0.3% to $2,660.80 an ounce.
Gold Rises with Focus on Fed Cues
The prospect of lower interest rates has kept gold prices on an upward trajectory, with investors eagerly awaiting more cues from the Federal Reserve in the coming days. Several Fed officials have expressed support for the recent rate cut and expect further cuts to follow. Market analysts at Citi predict at least 125 basis points of cuts by the end of the year.
Focus this week will also be on key economic data, including the Fed’s preferred inflation gauge set to be released on Friday. Lower interest rates typically benefit gold prices by reducing the opportunity cost of investing in non-yielding assets.
While gold has seen significant gains, other precious metals like silver and platinum have also risen, albeit at a slower pace. Silver rose 1.1% to $971.20 an ounce, while platinum climbed 1.1% to $31.430 an ounce.
Copper Prices Rally on China Stimulus
Copper prices surged after the Chinese government announced stimulus measures, including cuts in bank reserve requirements and mortgage rates. These measures have raised hopes for an economic recovery in China, the world's largest copper importer.
Despite the positive news from China, mixed manufacturing activity readings globally have limited copper's gains. Benchmark copper on the London Metal Exchange rose 1.6% to $9,702.50 a ton, while one-month copper futures surged 2.1% to $4.4380 a pound.
Analysis:
The recent rally in gold and copper prices is driven by a combination of factors, including expectations of further interest rate cuts by the Federal Reserve and stimulus measures in China. Lower interest rates bode well for gold as they reduce the opportunity cost of holding non-yielding assets.
Investors should pay close attention to upcoming cues from the Fed, as well as economic data releases, to gauge the future direction of precious metal prices. Additionally, developments in China's economy and global manufacturing activity will continue to impact copper prices in the near term.