Gold Prices Eye Record Highs Amid Expectations of Larger Rate Cuts

Gold prices experienced a slight decrease in Asian trading on Tuesday but remained near record levels, driven by increasing expectations that the Federal Reserve will implement a significant interest rate cut later this week.

On Monday, gold reached an all-time high and continued to trade just below that peak as traders anticipated a 50 basis point cut from the Fed during its upcoming meeting on Wednesday. The rise in gold prices came in response to the weakening dollar and declining Treasury yields.

As of the latest update, gold had dropped 0.2% to $2,578.03 per ounce, while December futures decreased by 0.1% to $2,605.05 per ounce.

### Influence of Rate Cut Expectations on Gold

Spot gold prices reached a record high of $2,589.69 per ounce on Monday, bolstered by a falling dollar amid speculation over a larger rate cut. The Federal Reserve is set to conclude its meeting on Wednesday.

Current market sentiments indicate a 68% likelihood that the Fed will opt for a 50 basis point cut, with a 32% chance of a smaller 25 basis point reduction. Lower interest rates typically benefit gold and other non-yielding assets, as they diminish the opportunity cost of holding them. It is widely anticipated that the Fed will hint at the beginning of an easing cycle, which could see rates drop by over 100 basis points before the year’s end.

Additionally, gold has gained from substantial central bank purchases this year, particularly by emerging market nations, contributing to its better performance compared to other precious metals.

In related movements, platinum rose by 0.2% to $990.50 per ounce, while palladium held steady around $31.145 per ounce.

### Copper Prices On the Rise Amid Economic Stimulus Speculation

In the industrial metals sector, copper prices inched higher on Tuesday, benefiting from a weaker dollar and expectations for lower interest rates.

However, concerns regarding China’s economy following a series of disappointing economic indicators in August limited further gains. Copper on the London Metal Exchange saw a minor increase of 0.1%, reaching $9,388.50 per ton, while one-month copper contracts increased by 0.3% to $4.2770 per pound.

Weaker economic data from China has fueled speculation that the government may need to introduce additional stimulus measures to bolster economic growth.