Gold Prices Reach Record High Amid Rate Cut Optimism; Copper Soars on China Stimulus

Gold and Copper Prices Surge Amid Optimism for Rate Cuts

Gold prices reached record highs during Asian trading on Tuesday, continuing a recent uptrend fueled by optimism regarding potential interest rate cuts in the U.S. Traders are now looking ahead to upcoming economic indicators this week.

In a related development, copper prices experienced a significant increase after the Chinese government unveiled a series of stimulus measures, sparking hopes for an economic revival in the world’s largest copper importer.

Gold prices soared to unprecedented levels following a substantial rate cut by the Federal Reserve last week, with the possibility of additional cuts offering more support for the precious metal. Demand for gold has also been bolstered by mixed purchasing manager index reports from several major economies and ongoing tensions in the Middle East.

Spot gold rose 0.3% to $2,638.31 per ounce, while December gold futures climbed 0.3% to $2,660.80 per ounce.

Gold Continues to Rise as Fed Signals More Cues

The positive sentiment surrounding gold is linked to expectations of lower interest rates, with several important announcements from the Federal Reserve anticipated in the coming days. On Monday, various Fed officials expressed support for last week’s 50 basis point reduction, although they indicated that the pace of future cuts may slow. However, analysts at Citi project at least 125 basis points in cuts by year-end.

This week, more Fed officials are scheduled to speak, including Chair Jerome Powell on Thursday. Additionally, attention is focused on the PCE price index data, the Fed’s preferred inflation measure, expected on Friday. Analysts anticipate that the reading will show inflation remaining above the Fed’s target range for August.

Lower interest rates tend to benefit gold since they diminish the opportunity cost of holding non-yielding assets. Following the Fed’s decision, the dollar and Treasury yields fell, further promoting gains in gold.

Other precious metals saw increases on Tuesday but generally lagged behind gold. Platinum futures rose 1.1% to $971.20 per ounce, while silver futures also climbed 1.1% to $31.430 per ounce.

Copper Prices Jump on Chinese Stimulus Announcement

Benchmark copper futures on the London Metal Exchange increased by 1.6% to $9,702.50 per ton, and one-month copper futures surged 2.1% to $4.4380 per pound.

On Tuesday, China announced an array of stimulus measures, including a 50 basis point cut in bank reserve requirements and reductions in rates for existing mortgages. These initiatives raised hopes for improved economic growth in China, which would likely enhance its demand for copper.

However, mixed purchasing manager index readings from around the globe posed some challenges for copper’s upward momentum, indicating a decline in manufacturing activity.