Gold Prices Rise After Significant Fed Rate Cut; Copper Steady on China Stimulus

Gold prices experienced an increase during Asian trading on Friday, following a significant interest rate cut by the Federal Reserve, which led to a decline in the dollar. Market participants reacted positively to the possibility of additional rate reductions.

In the realm of industrial metals, copper prices also rose as reports emerged that China, the top importer, was contemplating further supportive measures for its property market, particularly after the People’s Bank opted to keep benchmark lending rates unchanged.

Gold initially reacted negatively to the Fed’s rate cut on Wednesday, primarily due to Fed Chair Jerome Powell’s less dovish long-term outlook. However, the market’s optimism regarding potential near-term lower rates weakened the dollar and encouraged investment in risk-driven assets. Gold prices climbed by 0.3% to $2,593.31 an ounce, while December futures saw a 0.2% rise to $2,618.40 an ounce.

The demand for gold as a safe haven was further bolstered by escalating tensions in the Middle East, following allegations that Israel detonated electronic devices used by Hezbollah, which resulted in threats of retaliation.

### Weekly Gains for Gold Amid Fed Easing Cycle

Spot gold prices were on track to gain approximately 0.6% for the week, as the Fed began an easing cycle that could potentially reduce interest rates by up to 125 basis points this year. The central bank implemented a 50 basis point cut, aligning with the upper end of market expectations.

While Powell indicated that neutral rates might settle at levels higher than historically observed, traders were optimistic about the prospect of significant short-term rate cuts. Analysts at Citi suggested that the Fed might cut rates by another 50 basis points in November.

The size of the Fed’s cut raised concerns about slowing U.S. economic growth, which contributed to sustained demand for gold as a safe haven.

Lower interest rates are generally beneficial for gold, as they decrease the opportunity cost associated with investing in the metal. Other precious metals appeared mostly flat and continued to lag behind gold, with prices for platinum stabilizing at $989.55 an ounce and palladium slipping 0.3% to $31.340 an ounce.

### Copper Rises on China Property Stimulus Expectations

On the London Metal Exchange, benchmark copper prices increased by 0.5% to $9,582.50 a ton, while one-month futures rose by 0.7% to $4.3788 a pound. The uptick in copper prices coincided with reports that China was considering lifting major restrictions on home purchases to stimulate the housing market, a move that could significantly benefit the struggling property sector.

However, the People’s Bank of China maintained its benchmark rate on Friday, disappointing some traders who were hopeful for additional cuts to support the country’s sluggish economic growth. Calls for increased stimulus from Beijing have intensified recently, particularly in light of disappointing economic data released for August.