Gold Prices Slip Amid Rate Cut Expectations

Gold prices fell slightly in Asian trade on Tuesday but remained near record highs as expectations grow that the Federal Reserve will significantly cut interest rates this week.

Recent Gold Performance

The yellow metal reached a record high on Monday and traded just below those levels as traders anticipated a 50 basis point rate cut by the Fed on Wednesday. The strength in gold followed weakness in the dollar and Treasury yields.

• Spot gold: fell 0.2% to $2,578.03 an ounce
• Gold futures (December): fell 0.1% to $2,605.05 an ounce by 23:56 ET (03:56 GMT).

Factors Influencing Gold Prices

The record high of $2,589.69 an ounce hit on Monday was propelled by the dollar's decline fueled by expectations for a substantial rate cut. The Fed's two-day meeting concludes on Wednesday, where traders are pricing in a 68% probability of a 50 bps cut, and a 32% chance of a 25 bps cut, according to CME Fedwatch.

Lower rates are favorable for gold and other precious metals, as they decrease the opportunity cost of investing in non-yielding assets. Market forecasts suggest interest rates could drop by over 100 bps by the year's end, signaling the start of an easing cycle from the Fed.

Further buoying gold prices is increased demand from central banks, especially in emerging markets, outperforming other precious metals.

• Platinum futures: rose 0.2% to $990.50 an ounce.
• Silver futures: stabilized around $31.145 an ounce.

Copper Prices and China’s Economic Outlook

In industrial metals, copper prices increased slightly on Tuesday, benefiting from a weaker dollar and expectations of lower interest rates.

However, concerns about economic weakness in China hampered copper’s gains following disappointing economic indicators from August.

• Benchmark copper futures (London Metal Exchange): rose 0.1% to $9,388.50 a ton.
• One-month copper futures: increased 0.3% to $4.2770 a pound.

Weak economic readings from China reinforced the notion that the government may need to implement more stimulus measures to bolster the economy.