Gold prices eye record highs on Bigger rate cut bets by Investing.com

Investing.com– Gold prices edged lower in Asian trade on Tuesday but remained near record highs amid growing confidence 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. Gold’s strength came on the back of dollar weakness and Treasury yields.

was down 0.2 percent at $2,578.03 an ounce, while December expiration was down 0.1 percent at $2,605.05 an ounce by 11:56 p.m. ET (03:56 GMT) .

Gold benefits from 50 bps discount bets

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 due to conclude a Wednesday.

Traders were seen pricing in a 68% chance of the Fed cutting rates by 50bps at the end of Wednesday’s meeting and showed a 32% chance of a 25bps cut.

Lower rates bode well for gold and other precious metals, as they lower the opportunity cost of investing in non-yielding assets. The Fed is expected to signal the start of an easing cycle this week that could see interest rates fall by more than 100 bps by the end of the year.

The yellow metal has also benefited from some central bank buying this year, particularly in the emerging markets space. Thus, bullion prices performed better than other precious metals.

rose 0.2% to $990.50 an ounce, while settling around $31.145 an ounce.

Copper heads higher, China stimulus in focus

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 hampered by lingering concerns about top importer China, following a string of weak economic readings from the country for August.

The London Metal Exchange benchmark rose 0.1 percent to $9,388.50 a tonne, while on the month it rose 0.3 percent to $4.2770 a pound.

Weak readings in China fueled bets that Beijing will need to implement more stimulus measures to support the economy.