Gold Declines as Central Bank Purchases Expected to Increase Demand

Gold prices experienced a slight decline on Wednesday amid limited trading conditions due to the Juneteenth holiday in the U.S. At 07:30 ET (11:30 GMT), gold dropped 0.1% to $2,328.84 an ounce, while silver fell 0.2% to $2,343.20 per ounce.

Gold Prospects for Central Bank Support

Recently, gold and other metal prices have retreated following statements from the Federal Reserve, which indicated expectations of only one interest rate cut in 2024 instead of the previously anticipated three. This outlook has strengthened the dollar, making gold and other dollar-denominated commodities more expensive for international buyers and increasing the opportunity cost for investing in non-yielding assets.

In May, gold reached nearly $2,450 an ounce, driven by robust demand from central banks amid geopolitical tensions and ongoing inflation concerns. In 2022, central banks purchased a record 1,082 tons of gold, with 2023 seeing the second-highest addition at 1,037 tons. The World Gold Council’s annual survey found that 29% of central bankers plan to increase their gold reserves in the coming year, the highest level since the survey’s inception in 2018.

Other precious metals remained stable on Wednesday, with platinum rising 0.8% to $984.75 per ounce and palladium inching up 0.1% to $29.598 per ounce.

Copper Rebounds After Recent Declines

In the realm of industrial metals, copper prices saw a rebound on Wednesday after falling to a two-month low earlier in the week. The benchmark price on the London Metal Exchange rose 1.3% to $9,800.30 a tonne, while one-month copper futures increased 1.4% to $4.5550 a pound.

The recent dip in copper prices followed disappointing industrial output data from China, the largest market for the metal, as the housing and construction sectors in the world’s second-largest economy continue to struggle. Copper had previously reached a record high above $11,000 a tonne in May but has since cooled due to concerns about rising global inventory levels and weaknesses in China’s economic landscape.