Gold experienced a slight rise on Thursday, reacting positively to the Federal Reserve’s expected 25 basis points rate hike. The weakening dollar provided some relief to the metal markets.
The Fed’s decision to leave the possibility of another rate hike in September open, citing a strong labor market and sticky inflation, signaled a data-driven approach to future rate changes. As a result, gold moved further into the high-$1,900 an ounce territory but continued to struggle below the critical $2,000 an ounce level.
By 20:57 ET (00:57 GMT), spot gold remained flat at $1,972.49 an ounce, while gold futures expiring in August showed a modest 0.1% increase to $1,972.70 an ounce. Investors were cautiously awaiting further central bank decisions this week, with interest rate decisions from the European Central Bank (ECB) and the Bank of Japan (BOJ) also in focus.
Apart from the Fed, market attention was drawn to the ECB, which was widely expected to raise interest rates by 25 bps later in the day. Meanwhile, the BOJ was anticipated to maintain its dovish stance, but some traders positioned themselves for a potential hawkish surprise due to inflation trending above the annual target.
Rising interest rates were seen as a challenge for metal markets and likely to constrain significant gains in gold throughout the year. The Fed’s dismissal of the possibility of a rate cut this year further added pressure on metal markets, as U.S. rates remained at their highest level in 22 years.
Other precious metals also benefited from a weaker dollar. Platinum futures rose 0.1%, while silver saw a 0.4% increase on Thursday.
In the industrial metals sector, copper prices edged higher, supported by the weakening dollar. However, gains in copper were limited as market participants awaited more information on stimulus measures from China, a major importer.
Copper futures showed a 0.2% rise to $3.9110 a pound and were on an upward trajectory for the week due to the promise of additional stimulus measures by Chinese officials to bolster economic recovery. Nonetheless, weak manufacturing activity in other parts of the world continued to weigh on copper demand.
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