Gold Prices Pull Back as Markets Look Beyond 50bps Fed Rate Cut By Investing.com

Investing.com– Gold prices moved in a flat-to-lower range in Asian trade on Thursday and extended losses overnight, as less dovish signals from the Federal Reserve offset some optimism about a rate cut excessive interest.

Bullion price strength under pressure as the greenback rose sharply on bets that US interest rates may not fall as much as expected in the medium to long term.

The yellow metal also posted some gains after hitting record highs in the run-up to Wednesday’s Fed decision.

It was up 0.1 percent at $2,561.30 an ounce, while December expiry was down 0.5 percent at $2,585.65 an ounce by 00:24 ET (0424 GMT). Spot prices sustained some losses overnight and retreated further from recent highs.

Fed cuts rates by 50 bps but offers less favorable outlook

The Fed by 50 basis points – the upper limit of market expectations – on the first interest rate cut since the COVID-19 pandemic in 2020. The central bank also announced the start of an easing cycle.

Fed Chairman Jerome Powell quelled some concerns about an economic slowdown after excessive interest rate cuts, saying the risks between rising inflation and a weaker labor market were evenly balanced. Powell signaled the prospect of more rate cuts, with markets pricing in a total of 125 bps of rate cuts by the end of the year.

But Powell also said the Fed does not intend to return to an ultra-low rate environment as seen during COVID-19, and said the Fed’s neutral rate will be much higher than previously seen.

His comments presented a higher outlook for medium- and long-term rates and somewhat dampened optimism about Wednesday’s cut.

However, the prospect of lower rates bodes well for non-yielding assets such as gold, as it lowers the opportunity cost of investing in bullion.

Other precious metals rose on Thursday but also suffered losses overnight. rose 0.5% to $978.15 an ounce, while rose 0.2% to $30.755 an ounce.

Copper prices rise, China rate decision expected

Among industrial metals, copper prices rose on Thursday on expectations of more stimulus from top importer China, with a decision on the country’s interest rate due on Friday.

The London Metal Exchange benchmark rose 0.4 percent to $9,425.50 a tonne, while on the month it rose 0.6 percent to $4.2970 a pound.

The People’s Bank of China is expected to keep its benchmark unchanged on Friday. But persistent signs of economic weakness in the country are expected to eventually spur further cuts in the LPR.