Gold Prices Rise After Fed Rate Cut; copper bullish on China stimulus By Investing.com

Investing.com– Gold prices rose in Asian trade on Friday, as the dollar weakened after an excessive interest rate cut by the Federal Reserve, with markets supporting the prospect of further rate cuts.

Among industrial metals, copper prices rose as media reports said top importer China was considering more supportive measures for the housing market after the People’s Bank left benchmark lending rates unchanged.

Gold initially saw a negative reaction to Wednesday’s rate cut as Fed Chairman Jerome Powell also offered a less dovish outlook for longer-term rates.

But markets cheered the prospect of lower near-term rates, which hurt the dollar and spurred flows into risk-based assets.

It was up 0.3 percent at $2,593.31 an ounce, while December expiry was up 0.2 percent at $2,618.40 an ounce by 00:43 ET (0443 GMT).

Safe-haven demand for gold was also helped by worsening tensions in the Middle East after Israel reportedly blew up electronic devices used by Hezbollah, vowing revenge.

Gold heads for weekly gains as Fed begins easing cycle

Spot prices were set to rise about 0.6% this week as the Fed kicked off an easing cycle that could see interest rates cut by as much as 125 basis points this year. The central bank cut interest rates by 50 bps – the upper end of market expectations.

While Fed Chairman Jerome Powell signaled that neutral rates would be higher than seen in the past, traders welcomed the prospect of sharp rate cuts in the near term.
Citi analysts said the Fed could cut rates again by 50 bps in November.

The Fed’s massive tapering also raised some concerns about slowing US economic growth, keeping safe-haven demand for gold in play.

Lower rates bode well for gold, as they reduce the opportunity cost of investing in the yellow metal.

Other precious metals were flat and mainly lagging this week. settled at $989.55 an ounce, while it fell 0.3% to $31.340 an ounce.

Copper on hopes of Chinese property stimulus

The London Metal Exchange benchmark rose 0.5 percent to $9,582.50 a tonne, while on the month it rose 0.7 percent to $4.3788 a pound.

Copper’s gains came as Bloomberg reported that top importer China is considering lifting major restrictions on home purchases to revive the housing market – a move that could offer a chance for the struggling real estate sector.

But the People’s Bank of China kept the benchmark unchanged on Friday, disappointing some traders hoping for more interest rate cuts to support the country’s sluggish economic growth.

Calls for more stimulus from Beijing have increased in recent weeks, especially after a string of weak economic readings for August.