Gold prices retreated in Asian trading on Thursday, remaining close to their recent lows, as the Federal Reserve lowered its expectations for interest rate cuts this year, further challenging the yellow metal.
Gold losses occurred despite a decline in the dollar during overnight trading amid a weak reading on the Consumer Price Index. However, the dollar stabilized on Thursday as markets absorbed stricter expectations from the Federal Reserve.
Metal prices declined on Thursday after Federal Reserve Chairman Jerome Powell indicated that the central bank expects to lower interest rates only once this year, with some policymakers even advocating against rate cuts in the face of steady inflation. The Federal Reserve also raised its inflation forecast for the year.
The prospect of longer-term interest rate hikes spells trouble for gold and other precious metals, increasing the opportunity cost of investing in non-yielding assets. Gold has also been impacted by indications that some major central banks, particularly the People’s Bank of China, halted gold purchases in May. Nonetheless, analysts at Citibank mentioned in a recent note that gold could rise to $3,000 per ounce over the next 12 months.
Other precious metals also declined on Thursday. Platinum futures fell 1.3% to $951.55 per ounce, while silver futures dropped 3.3% to $29.262 per ounce. Industrial metals also recorded losses on Thursday. Copper prices fell, as prolonged expectations of interest rate hikes provided weak outlooks for economic activity.
Increasing concerns about further stimulus measures in China, the largest importer, affected sentiment towards copper, as recent economic readings showed a mixed recovery in the Chinese economy. Futures for three-month copper declined 1.1% to $9,837.50 per ton on the London Metal Exchange.
