Gold Prices Dip Amid Fewer Rate Cuts Expected This Year

Gold prices experienced a decline during Asian trading on Thursday, hovering near recent lows as the Federal Reserve revised its forecast for interest rate cuts this year, which poses additional challenges for the precious metal.

Despite a dip in the dollar during overnight trading due to softer economic data, the U.S. currency stabilized on Thursday as the market absorbed the Fed’s more hawkish stance.

Gold fell by 0.7% to $2,309.69 an ounce, while August futures declined by 1.2% to $2,325.60 an ounce.

### Impact of Fed’s Outlook on Gold and Precious Metals

On Thursday, broader metal prices suffered after Fed Chair Jerome Powell indicated the central bank now anticipates only one interest rate cut this year, a revision from previous expectations of three cuts. Some policymakers even suggested the possibility of no cuts at all due to persistent inflation, with the Fed also raising its inflation forecast for the year.

The likelihood of sustained higher interest rates negatively affects gold and other precious metals since it raises the opportunity cost of investing in assets that do not yield interest. This has contributed to the brief nature of any record highs in gold prices over the past year.

Gold demand may also have been affected by reports that major central banks, particularly China’s central bank, stopped purchasing gold in May. However, analysts at Citi mentioned in a recent report that gold prices could potentially reach $3,000 an ounce within the next year.

Other precious metals faced losses as well on Thursday; platinum decreased by 1.3% to $951.55 an ounce, and palladium dropped by 3.3% to $29.262 an ounce.

### Copper Prices Decline on Economic Woes

Industrial metals also suffered losses due to a grim economic outlook. Copper prices fell as the prospect of prolonged high interest rates dampened expectations for economic activity.

Concerns about the need for additional stimulus measures in China, the largest copper importer, further impacted sentiment, especially as recent economic indicators suggested a mixed recovery in the Chinese economy.

The benchmark three-month copper price on the London Metal Exchange decreased by 1.1% to $9,837.50 a tonne, while the one-month copper rate fell by 0.5% to $4.5095 a pound.