Gold Prices Stabilize Amid Rate Cut Expectations; Copper Gains on Tight Supply Outlook


Gold Prices Stabilize Amid Rate Cut Expectations; Copper Gains on Tight Supply Outlook – Gold prices steadied on Wednesday, maintaining a trading range established over the past week amid persistent expectations that the Federal Reserve will implement interest rate cuts in early 2024.

The yellow metal appeared to consolidate within the range of low-$2,000 to $2,050 per ounce, fueled by growing optimism about lower interest rates in the coming year. However, increased risk appetite limited capital flows into gold, with traders favoring higher-yielding assets.

Gold prices, nonetheless, remained above the coveted $2,000 level. This week’s gains brought them closer to record highs, reaching nearly $2,150 per ounce.

Spot gold remained flat at $2,040.03 per ounce, while gold futures for February rose 0.1% to $2,053.05 per ounce by 00:25 ET (05:25 GMT). Both instruments recorded robust gains on Tuesday as the dollar dropped to four-month lows, and Treasury yields fell below key levels.

Persistent expectations of a rate cut in March 2024, despite warnings from some Fed officials, contributed to the Fed Fund Futures prices showing a 67.5% chance of a 25 basis point cut in March. Fed officials emphasized uncertainty about the timing of interest rate adjustments, considering sticky U.S. inflation.

The resilience of the U.S. economy could provide the Fed with more flexibility to maintain higher rates for an extended period. Gold, benefiting from a lower interest rate environment, faces potential challenges due to increased risk appetite and reduced safe-haven demand if the U.S. economy suggests a soft landing.

Copper Prices Rise on China’s Prospects and Tight Supply

Among industrial metals, copper prices neared a more than four-month high on Wednesday, driven by expectations of tighter supplies and increased demand in 2024.

Copper futures for March rose 0.2% to $3.9143 per pound. Anticipated limitations in red metal supplies in 2024, following major mine closures in Peru and Panama, coincided with rising demand, especially in the electric vehicle and green energy sectors.

China’s copper demand is expected to surge as the country implements additional infrastructure spending to support its economy. However, uncertainties persist about the timing of further stimulus measures from China, as its central bank maintained benchmark lending rates at record lows, signaling limited headroom for more monetary stimulus.

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